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Fukui tipped as new BOJ governor
TOKYO, Japan (Reuters) -- Final talks are under way to appoint former Bank of Japan official Toshihiko Fukui as the next Bank of Japan governor, the Yomiuri newspaper reported on Monday. Fukui, now head of Fujitsu Research Institute, is considered a conservative candidate to replace current governor Masaru Hayami, whose five-year term ends on March 19. Prime Minister Junichiro Koizumi is expected to announce his decision on a replacement for Hayami in the next few days. "With deflation more serious than ever there is a need for the government and BOJ to work as one and (the government) is leaning toward the decision that Fukui, who can communicate closely with the government and is well versed in monetary policy, is appropriate," the newspaper said. Koizumi will make his decision after meeting with Finance Minister Masajuro Shiokawa later on Monday, the report said. A government official declined to comment. Inflation targetingBOJ watchers consider 67-year-old Fukui as unlikely to depart from the policies of Hayami, an opponent of radical monetary easing policies such as inflation targeting. The issue of inflation targeting has been a major talking point as Koizumi considers who to pick for the BOJ job. Koizumi has said he wants a deflation fighter to lead the BOJ, which has already driven interest rates to near zero. That had raised speculation he might be in favor of a radical candidate such as Nobuyuki Nakahara, a proponent of aggressive monetary steps and advocate of inflation targeting. "If Fukui is appointed, markets will get the impression that inflation targeting is far off so the yen could move higher in the short term," said Yasunari Ueno, chief market economist at Mizuho Securities. "Stocks will likely move lower as many, especially overseas, players, had expected someone who favoured inflation targeting. "On the other hand, bond prices will likely rise as the market will be relieved because drastic policies won't be adopted," Ueno said. The dollar was trading at 118.83 yen in early trading Monday in Tokyo, up slightly from 118.64 in late U.S. trading on Friday. Eiji Dohke, chief strategist at UFJ Tsubasa Securities, agreed that the bond market will likely be relieved, but he said it would take more for bond yields to head much lower. Under pressureHe also said said that whoever gets the top BOJ post will be under pressure to take more measures to tackle deflation. Under inflation targeting, the BOJ would set a target for inflation over a fixed period and then employ measures to achieve it, including buying a wider range of assets such as stocks, foreign bonds or even property to pump cash into the economy. Fukui has said Japan's three years of deflation is a result of structural problems and not just a monetary phenomenon and that the government should change the way it spends to fix it. In the late 1990s, Fukui, who was then deputy BOJ governor, was seen as the most likely candidate to succeed then central bank head Yasuo Matsushita. But he stepped down along with Matsushita in March 1998 to take responsibility for a senior BOJ official's arrest on suspicion of leaking sensitive market information to banks in exchange for lavish entertainment and golfing trips. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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