Bank of Japan Governor appointment pushed back to next week; Is Fukuda crumbling?

February 27, 2008
By Ken Worsley

Last week we learned that on Thursday night, members of the ruling Liberal Democratic Party and the opposition Democratic Party of Japan had gathered at a restaurant in Yokohama in order to hold backroom negotiations on who should be nominated for the position of Governor of the Bank of Japan. While the ruling party wants to see current Deputy Governor Toshiro Muto put into the job, many powerful members of the opposition party apparently remained unconvinced. DPJ leader Ichiro Ozawa told reporters today, “I’ve also known Muto well since he was in the Okura-sho (the former term for the Ministry of Finance), but whether or not he’s fit to be [BOJ] Governor is a different question.”

The DPJ is currently fighting hard to keep the focus on Muto, rather than their own strategies. After rumors that an appointment would be made early this week, the Asahi Shimbun is now reporting that the issue has been pushed back to next week. Although the DPJ is stating serious reasons for opposing the appointment of Muto, one is forced to wonder to what degree is the opposition attempting to flex its muscles in the face of what appears to be the continually ineffectual administration of Prime Minister Yasuo Fukuda.

Still reeling from the government’s bungled response to recent scandals over imported food and the collision of a Marine Self-Defense Forces destroyer with a fishing boat, Fukuda has seen his cabinet’s approval ratings fall below 30% for the first time since taking office, according to the most recent survey data released by the Sankei Shimbun.

Fukuda’s response to the delay in the appointment process? “I really have nothing to say. There’s nothing we can do but wait.”

(Taro Aso, who has his sights set firmly on being the next Prime Minister, must be rubbing his hands right now, and buying Ozawa cases of whiskey - or perhaps even getting him a slot on SMAPxSMAP, which Aso himself recently did. Was Aso in Yokohama last Thursday night? Was he pushing for Muto?)

At any rate, one thing is confirmed: The LDP has lost a considerable amount of clout and would not dare calling the DPJ’s bluff on this issue by nominating Muto and forcing the DPJ to vote in a fashion that would make them look bad. In other words, neither Muto nor anyone else will be appointed unless his confirmation is assured in backroom negotiations - the risk of loss of face, for both the candidate and the ruling party, is simply too great. This simply confirms the lasting importance of backroom politicking, even if it sometimes has to be done in Yokohama.

Is there a chance that the Bank of Japan will have no governor on March 20? We tend to doubt that, given that it would bring about yet another loss of face (not because policy would be seriously affected), and would raise some serious eyebrows around the world about the ability of Japan’s political leadership to get things done. Could this play a part in forcing a general election? We’re just going to have to wait and see how much this fiasco further weakens the public perception of Mr Fukuda’s administration. Wait and see - now we sound like Fukuda.

Filed Under Bank of Japan, Finance, Politics