Japan’s government nominated BNP Paribas SA economist Ryutaro Kono to join the central bank’s policy board, drawing criticism from lawmakers concerned that he won’t support bolder action to end decade-long deflation.
Kono, 47, BNP’s chief Japan economist, was tapped for the nine-member board after a committee meeting of lawmakers from both chambers of parliament, a statement showed today.
The nomination comes as the BOJ faces increasing pressure to spur a rebound in an economy that shrank for three of the past four years and is struggling to recover from last year’s earthquake. Lawmakers within the ruling Democratic Party of Japan and also in opposition parties are calling for Governor Masaaki Shirakawa’s board to double an inflation goal of 1 percent set only last month and expand asset purchases.
“We’ve seen him as someone who is negative towards monetary easing,” said Takeshi Miyazaki, a DPJ lawmaker and a leader of the ruling party’s anti-deflation group, said in Tokyo today. “We’re worried that the market may be concerned that this will push the yen higher and worsen deflation.”
Kono cautioned about “aggressive monetary policy” in a Bloomberg News survey this month. In a sign of increased scrutiny of the central bank, Shirakawa has been called to the Diet 14 times this year as of 23 March. At that pace, his appearances in 2012 will be more than double the number in 2011.
Elsewhere in Asia today, Federal Reserve Bank of St. Louis President James Bullard told a conference in Hong Kong that U.S. monetary policy may be at a turning point and the Fed’s first interest-rate increase since the global financial crisis could come as soon as late 2013.
Data in the U.S. will give the latest reading on the nation’s property market, with new home sales likely to have climbed in February to the highest level in more than a year. Italy will report retail sales, while Canada issues inflation data.
Stocks fell in Asia today on concern that weakness in China’s recovery will cap growth across the region and in the world. A leading index for the nation released by The Conference Board rose at a slower pace in February.
“While the economy continues to expand, it is unlikely to strengthen any further in the coming months,” Andrew Polk, resident China economist at the New York-based organization,said in a statement.
The MSCI Asia Pacific Index of stocks slid 0.7 percent as of 2:02 p.m. in Tokyo.
In Japan, Kono said this month that BOJ policy alone cannot solve structural problems including an aging population and a growing public debt burden. He also warned that financing government debt through a prolonged zero-rate policy and bond- buying by the central bank could hamper growth.
His comments echo the views of Shirakawa, who has warned that monetary policy cannot solve all of Japan’s woes and that financing public debt would damage the economy over time.
“The side effects of prolonged and fixed policies can’t be ignored,” Kono said. “Because of the ballooning public debt, responding with an aggressive monetary policy could bring the risk that public debt could start the process of spreading due to increased nominal interest rates.”
Kono has been at BNP Paribas since 2000. He graduated from Yokohama National University with a degree in economics in 1987. His published works include translations of books by Paul Krugman and Princeton University Professor Alan Blinder, the latter which was co-translated with Eiji Maeda, currently the BOJ’s top economist.
Kono “has good communication skills and is a prominent economist in Japan,” said Takuji Okubo, chief Japan economist at Societe Generale SA in Tokyo, referring to Kono. “In that sense, this nomination is desirable for the BOJ. It’s a choice that would be difficult for the opposition parties to oppose.”
In contrast with the lawmakers’ concerns, Okubo described Kono as “dovish.” He added that he wasn’t a person who says “radical things.”
The appointment needs the approval of both houses of the Diet. If approved, he will join the board as soon as the April 9-10 meeting. Kono was nominated to replace Seiji Nakamura, 69, a shipping company executive, in a break with a tradition of replacing members with people from similar backgrounds.
“He’s someone who is negative about quantitative easing and the inflation target policy,” said Kozo Yamamoto, an opposition Liberal Democratic Party lawmaker who said his party should reject the nomination. “His nomination should be refused by the upper house. What the BOJ policy board needs is a someone who supports reflation.”
The steering committee charged with handling the appointments only made one nomination today after another candidate’s name was leaked to the media, Yosuke Tsuruho, an opposition Liberal Democratic Party lawmaker who sits on the group, told reporters in Tokyo today. The Nikkei newspaper reported Kohei Watanabe, an adviser to trading house Itochu Corp. (8001), would be nominated. Watanabe’s candidacy will not be considered, Tsuruho said.
The Bank of Japan expanded asset purchases in February, while board member Ryuzo Miyao’s proposal for more stimulus was rejected in March. The appointment of new board members is part of the lead-up to a bigger shift: Shirakawa’s term is ending in April 2013 and two deputy governors are finish their tenures in March next year.
BOJ nominations haven’t always been successful. Shirakawa was originally appointed as a temporary governor in 2008 as the opposition controlled upper house had rejected the government choices for the BOJ top positions. He was subsequently confirmed. In 2008 and 2009, the opposition-controlled upper house rejected five nominees for governor, deputy governor and board member. Since then, four new policy board members have been approved without political opposition.
“He has great knowledge of financial markets, and is bound to add a lot to rate decision meetings.” said Naoki Iizuka, a senior economist at Mizuho Securities Co. in Tokyo and an acquaintance of Kono. “He’ll be neutral. He won’t take the lead on monetary easing, but he won’t oppose any proposals to expand stimulus.”
To contact the reporters on this story: Keiko Ujikane in Tokyo at firstname.lastname@example.org; Masahiro Hidaka in Tokyo at email@example.com; Takashi Hirokawa in Tokyo at firstname.lastname@example.org
To contact the editor responsible for this story: Paul Panckhurst at email@example.com