Morimoto Nominated to Bank of Japan’s Policy Board (Update2)
March 12, 2010, 1:31 AM EST(Adds economist’s comment in the fourth paragraph.)
By Mayumi Otsuma and Sachiko Sakamaki
March 12 (Bloomberg) -- Japan’s government nominated former Tokyo Electric Power Co. executive Vice President Yoshihisa Morimoto to join the Bank of Japan’s policy board, filling its last vacancy as policy makers grapple with entrenched deflation.
The decision was made at a committee meeting of lawmakers from both chambers of parliament, according to a statement released today in Tokyo. If approved by the full Diet, Morimoto, 65, would be the ninth member of the central bank’s board.
Morimoto, currently a director at the utility company, will be charged with setting policy as central bank Governor Masaaki Shirakawa tackles deflation that is hampering the economy’s rebound from its worst postwar recession. Cabinet ministers are calling on the bank to do more to end price declines while BOJ officials say there are no “magic” measures to beat deflation.
“We still don’t know whether his stance is hawkish or dovish,” said Hideo Kumano, a former BOJ official and now chief economist at Dai-Ichi Life Research Institute in Tokyo. “So far the implication of his participation on the board is neutral.”
Morimoto, who is also the vice chairman of the Federation of Electric Power Companies of Japan, could not be reached for comment today.
Shirakawa and his board will hold a policy meeting next week where they may seek to counter a contraction of their balance sheet caused by an forthcoming expiration of an emergency-credit program. The governor today told parliament that bolstering liquidity alone won’t spur demand and that the bank will keep interest rate low persistently to prop up the economy.
Easier for Companies
Since lowering its benchmark interest rate to 0.1 percent in December 2008, the central bank has increased its purchases of government bonds and made it easier for companies to obtain funds. The bank in December adopted a 10 trillion yen ($110 billion) lending program for commercial lenders after the yen surged to a 14-year high against the dollar and Finance Minister Naoto Kan called on the bank to do more.
“Political pressure may intensify should the government find it needs to spend more spending to boost economic growth,” Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo, said before the appointment was announced. “With little room left to explore further fiscal measures, it’s possible that the government will try to depend more on the central bank.”
Morimoto’s addition to the board would make him the third corporate executive from a non-financial company. Hidetoshi Kamezaki, a former executive of Mitsubishi Corp., and Seiji Nakamura, formerly president of MOL Ferry Co. Ltd., joined the board in April 2007.
Increase Influence
More members from the corporate sector may increase the influence Shirakawa and two his deputy governors have on the board because “setting monetary policy is a sort of art that requires a lot of expertise and knowledge of technical issues,” said Dai-Ichi’s Kumano.
If approved by parliament, Morimoto will join the bank in July due to previous commitments, the government said. That means the central bank may wait to review its understanding of stable prices until then, according to Kumano at Dai-Ichi Life. The board revised its range in December, when it said they consider prices as stable when they rise as much as 2 percent.
The government in December appointed Kobe University Professor Ryuzo Miyao to join the central bank’s policy board. Miyao is scheduled to assume the post this month.
The final seat has been vacant since March 2008, when the ruling Democratic Party of Japan, then in opposition, blocked the government’s choice for governor.
--With reporting by Aki Ito and Toru Fujioka in Tokyo. --Editors: Lily Nonomiya, John Brinsley
To contact the reporters on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net; Sachiko Sakamaki in Tokyo at ssakamaki1@bloomberg.net
To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net
