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The hunt for the next BOJ
governor
By Richard Hanson
TOKYO - This is not, repeat not, a leak from the
central bank. But it may be some day soon.
Amid
strong signs that that Japanese Prime Minister Junichiro
Koizumi is determined to step up his fight against
deflation, an emerging dark-horse candidate to become
the next governor of the Bank of Japan, a crucial
position that comes vacant on March 19, could be Masaru
Hayami, 77, currently the governor of the Bank of Japan.
"That sounds okay," says one former senior
central banker, pointing that just about every other
even remotely qualified name in Japan has been
speculated upon breathlessly in these recent darkening
pre-holiday December days.
The logic of such
December speculation for a March job opening is simple.
Since 1964, all governors of the central Bank of
Japan (BOJ) until the incumbent governor Hayami were
named to the post in the middle of December, the time
when the Diet (parliament) usually recesses (as it did
again this year). Before that, dating back to 1882 there
was no set pattern, according to BOJ's list of
governors. (There are only two governors in its history
who have served two terms.)
Hayami and his two
deputies (Sakuya Fujiwara, a journalist, and Yutaka
Yamaguchi, of BOJ) were March appointees because the
previous governor, Yasuo Matsushita, and his deputy
governor, Toshihiko Fukui, resigned in March 1998. This
was one year and nine months earlier than their original
appointed term.
They took responsibility for
some truly un-central-bank-like scandals (in which they
were not implicated). BOJ was actually raided for the
first time (except during the Occupation) by the law.
That experience was a bitter pill for the highly
regarded deputy governor Fukui, who might have become
the next governor if the full term had been served.
Fukui is now in the private sector as chief of a
research institute affiliated with Fujitsu Ltd, the
electronics company.
This time, Fukui has shown
no interest in becoming the next governor after Hayami's
term ends, despite constant pestering by the press. He
simply says no. That is a loss. He is respected here and
abroad for his brilliance and common sense, especially
as an alarm-ringer as Japan went bonkers in the bubble
stock and property (and bad bank) mania of the late
1980s.
The Japanese economy would benefit from
having Fukui back in the monetary saddle again. Other
people who are mentioned often in the press as
candidates include former Policy Board member Nobuyuki
Nakahara (a former president of an oil refiner and
active in the bad-bank-loan cleanup), current BOJ Policy
Board members (including one woman), former Ministry of
Finance officials (mostly out of favor), and a
smattering of academics and other private-sector
appointees.
Most of the people in Koizumi's
inner triangle of economic and financial cabinet
officers are out of the running for the governor's
job.
Academic - and defunct Japan Development
Bank-rooted Heizo Takenaka is too busy as minister of
state for the economy and financial services to become a
central banker. He also talks too much on television
talk shows. Finance Minister Masajuro Shiokawa, at 80,
is older than Hayami, and seems happy in his current
job.
Both Takenaka and Shiokawa mimic what
Koizumi has said in public about who would make a good
candidate. They agree on the following: It would be
"ideal" to select someone from the private sector.
This qualification is hedged by the fact that it
could be someone who went from public service to private
business. Governor Hayami left BOJ in 1978 to join the
trading company Nissho Iwai Corp, where he rose to the
posts of president and chairman. Hayami also served as
chairman of the Japan Association of Corporate
Executives (Keizai Doyukai) and as a university trustee.
The candidate would have to be able to take
"bold action" in the battle against deflation. Koizumi
wants a candidate "who will pull out all the stops to
combat deflation".
The government will need
strong backup from the central bank as it pursues both
fiscal and other measures to prop up the economy. In the
past few months, BOJ, under governor Hayami, has
delivered a number of measures that stretch some of the
limits of just what a central bank can do in the face of
sluggish economic growth and falling values in form of
deflation.
One very senior source at BOJ points
out that while the media enthusiasm in the
hunt-for-ideal-governor saga has fired up this month,
there is still plenty of time to contemplate who is the
right man or woman for the job. Koizumi is looking at
both the economics and the political agenda he faces in
the new year. If he is true to his past style, the final
decision will be kept in his head until the time is
right.
There are elections coming up in the
spring. That means getting his own party into shape.
Appointing someone like Hayami would have the added
possible benefit of an indirect nod to former prime
minister Ryutaro Hashimoto, who nominated Hayami in the
first place. Hashimoto has been a strong opponent of the
prime minister since he lost the Liberal Democratic
Party (LDP) leadership election in April 2001 to
Koizumi. The BOJ governor's post is nominated by the
cabinet but under the new BOJ Law approved by both
houses of the Diet.
So Koizumi may be baffled by
the inability to work out measures that offer an ideal
economic solutions. The search for an ideal central
banker is frustrating. Chief Cabinet Secretary Yasuo
Fukuda admitted this week as the BOJ search continued:
"We have no favorite yet."
What is clear is that
Koizumi is determined to name a governor who will do the
kind of job that will make life easier for his
government and himself. Hayami has been steadily moving
closer to Koizumi's view of reform and the role that the
central bank must play - even if it is un-central
bankish - in order to bring Japan out of its economic
funk.
Hayami has been quick in the banking
crisis to offer his expertise. "I am the expert in these
matters," he immodestly once declared.
Whether
he gets a nod for a second term is still way out of line
in current speculation. No one in Japan seems to think
that an elderly central banker should serve long and
well. Only places like the United States and Europe
think that.
In any case, the next few months
will be more about what the central bank can do for the
country than who is doing it.
Hayami has not
commented on the subject of who will take over the
position that he took up in on March 20, 1998.
That is central bank-like.
Next: How the BOJ will strut its stuff
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