By MARTIN FACKLER
March 20, 2008
SourceTOKYO — The top post at Japan’s central bank now sits empty after a political standoff in Parliament blocked selection of a successor to the departing governor, whose five-year term ended Wednesday.
World economic leaders face the uncomfortable prospect of having no one to call the shots at the Bank of Japan, the central bank of the world’s second-largest economy. It seems likely the bank will remain leaderless for at least a few days as Prime Minister Yasuo Fukuda scrambles to find a candidate acceptable to the largest opposition party.
A last-minute effort to fill the post failed Wednesday when the opposition-controlled upper house of Parliament rejected the second government nominee for the post in a week. The rebuff was widely seen here as a damaging political setback to the already unpopular Mr. Fukuda, who is increasingly blamed for the bank’s leadership vacuum.
Economists and former bank officials call it a humiliating situation for a country that has been trying for years to assume an international political role commensurate with a nearly $5 trillion economy.
“It’s a national disgrace,” said Mikio Wakatsuki, a former executive director at the bank who is now chairman of AXA Life Insurance of Japan. “Japan is at risk of becoming the missing link in multinational efforts.”
Mr. Wakatsuki and others see in particular a blow to confidence in Japan’s ability to manage its economy at a time of global financial turmoil. The deputy governor will most likely step in to run day-to-day affairs at the bank, but the prominent vacancy will only raise further worries about Japan’s direction as its growth slows and its economic policy appears increasingly adrift.
“It is doubtful whether the Bank of Japan can work well for long without the top post being filled,” the departing governor, Toshihiko Fukui, warned in a farewell news conference on Wednesday.
World economic leaders may also feel the loss, some economists and former bank officials said. Lack of a chief means there will be no one at the central bank to confer regularly with overseas counterparts like the Federal Reserve chairman, Ben S. Bernanke. Former central bankers say such informal discussions are important in working out joint actions or considering the wisdom of market intervention.
What is more, Japan has a lot to offer to other central banks in the current crisis, former central bankers here say. The country is the only major economy to have recently weathered a housing market debacle and resulting banking crisis on a scale similar to that in the United States. Indeed, former Japanese central bank officials are eager to point out the parallels between their nation’s financial collapse in the early 90s and what is happening now in the American economy.
“We have faced a problem of the same magnitude before,” said Takashi Anzai, a former Bank of Japan official who is now president of Seven Bank in Tokyo. “We bring rich experience to the table.”
The Japanese, though, face their own problems of political gridlock and finger-pointing.
The main opposition Democratic Party of Japan has warned for weeks that it will not approve nominees who come from the finance ministry, saying they would undermine the central bank’s independence. Despite those warnings, both candidates for governor offered in the last week by Mr. Fukuda held top posts at the ministry.
Each side has blamed the other for the impasse. But public opinion seems to be turning increasingly against Mr. Fukuda, especially after the second nominee turned out to be Koji Tanami, a former vice finance minister who now heads the Japan Bank for International Cooperation. Even many members of Mr. Fukuda’s party, the Liberal Democrats, expressed dismay at his seemingly stubborn insistence on nominating former ministry officials.
Political analysts said the choice reinforced a public perception that the prime minister was under the thumb of powerful ministry bureaucrats, as has often been the case here. They said this would only strengthen the opposition Democrats, who have gained popularity by vowing to change politics as usual in Japan.
Political analysts speculated that Mr. Fukuda either grossly underestimated the depth of the Democratic Party’s objections, or simply could not come up with a more appealing candidate in time. Either way, they said, he has the most to lose from a prolonged stalemate, which could force him to resign by eroding support in his own Liberal Democratic Party.
“The L.D.P. ends up looking arrogant,” said Norihiko Narita, a political science professor and president of Surugadai University near Tokyo. “Mr. Fukuda is insisting on having his way.”
Some warn that the rebuffs in Parliament have made it more difficult to find a suitable bank governor — few qualified candidates may now be willing to face the public scrutiny and the possibility of a humiliating rejection.
“No one likes being the third-best choice,” Mr. Wakatsuki said. “The list of possible candidates is getting shorter and shorter.”