Japan parliament rejects bank choice

TOKYO – The upper house of parliament voted down the government’s nominee to lead the Bank of Japan on Wednesday, setting up a political showdown with a week left before the current central bank head’s term ends.

The stalemate in the legislature is a major embarrassment to the Japanese government, coming at a time when fears are growing about a global slowdown and central banks around the world are trying to work together to calm jittery markets.

The opposition, which controls the upper house, made good on threats to block the appointment of Toshiro Muto, the Bank of Japan’s deputy governor, claiming his long history as a former bureaucrat at the Ministry of Finance would undermine the central bank’s independence.

The opposition also rejects Muto because of outrage toward the ruling Liberal Democratic Party, which has used its edge in the more powerful lower house to ram through some bills that require approval from only that chamber.

Bank of Japan Gov. Toshihiko Fukui steps down March 19. The appointment of his successor and two deputy governors at the central bank needs approval from both houses of parliament.

Muto was rejected by a vote of 129-106.

In a twist, the opposition approved one of the government appointments for deputy, former BOJ Executive Director Masaaki Shirakawa, 58, now a Kyoto University professor. He won 230 supporting votes from the chamber to seven opposed.

If there is a delay in agreeing on the appointments, Shirakawa is likely to step in to serve as interim bank chief.

The government nominee for the other deputy post, Takatoshi Ito, 57, a professor at the University of Tokyo, was voted down along with Muto, 64.

Finance Minister Fukushiro Nukaga said the government wasn’t about to give up.

“The government and the ruling parties proposed the trio on the view they’re the best,” he said, denying that the government had anyone else in mind. “Efforts need to be made to gain understanding.”

The popularity ratings of Prime Minister Yasuo Fukuda have been dropping lately, particularly over the scandal-plagued defense ministry’s mishandling of a military ship’s crashing with a fishing boat. Many Japanese are eager to see new political leadership.

But opinion is mixed about the opposition’s handling of the Bank of Japan appointment.

Major Japanese newspapers were critical of the Democrats in today’s editions.

“The Democrats are irresponsible,” said the editorial in the Nikkei, the nation’s biggest business daily. “The Democrats were opposed from the start. Is that the proper response for a responsible political party?”

In confirmation hearings Tuesday, Muto appealed for support for his candidacy and pledged to do his utmost and carry out extensive analysis to promote growth and ensure stable prices amid burgeoning risks, including a possible U.S. slowdown and surging oil prices.

He also promised to uphold the independence of the Bank of Japan.

While few expect the political scuffling to have any immediate damage to Japan’s economy, the prospect of a vacuum in such a high-profile spot has raised concerns about future monetary policy.

The Bank of Japan has kept its key rate at a low 0.5 percent in an effort to sustain the country’s modest economic growth. Some analysts say the economy is already showing signs of slowing.

Earlier Wednesday, the government revised downward the fourth-quarter economic growth figure to a still-strong 3.5 percent annual pace. The preliminary estimate had been 3.7 percent.

Chief government spokesman Nobutaka Machimura urged the Democrats to approve Muto.

“What parliament should do is hold discussions at various levels to avoid a vacuum,” he told reporters.