Japan growth at risk with stalemate over bank governor
Updated
Japan's Opposition-controlled Upper house has rejected two nominations by the Government in the past week to replace the head of the Bank of Japan who retires Thursday.
Presenter: Karon Snowdon
Speakers: Craig Freedman, Director, Centre for Japanese Economic Studies, Macquarie University
SNOWDON: The ruling Liberal Democratic Party and the Opposition Democratic Party, the DPJ are blaming each other for the fiasco.
The DPJ has rejected two government nominations for the replacement Bank Governor.
It says they are crony nominations which threaten the independence of the Central Bank.
To most onlookers, the situation is not only farcical, it's dangerous.
FREEDMAN: It's part of the reason why countries economies go into recession or not.
SNOWDON: Craig Freedman is the Director of the Centre for Japanese Economic Studies at Australia's Macquarie University.
He says both sides are playing politics, and risk damaging Japan's fragile economic recovery.
FREEDMAN: If the US economy goes into a recession the Japanese economy will be hurt and the wrong monetary policy can then make matters even worse.
SNOWDON: Well isn't it the case though in Japan that basically the bureaucracy runs the show effectively, does it really matter who the single person at the top, the governor is, won't policy remain much the same regardless?
FREEDMAN: No I think that's a bit of a myth because if we look at former governors of the Bank of Japan the last one did a reasonable job but the one before that I think made some very bad mistakes and was a contributing factor, perhaps a large contributing factor, in the very slow recovery Japan had.
SNOWDON: The Opposition refuses to budge but has offered no alternative. It holds the majority of seats in the Upper House, while the ruling LDP controls the lower House of Representatives.
The Opposition's tactics appear aimed at trying to inflict more pain on Prime Minister, Yasua Fukuda whose popularity is low.
FREEDMAN: I can't see them doing anything but simply blocking to show that they have the power to block.
SNOWDON: And on the other hand of course the ruling party, the LDP, the government in fact has waited really till the 11th hour to make their nomination known when really the retiring governor had a deadline they knew months in advance they could have got this process going earlier. What's going on there from the government's side as well?
FREEDMAN: Well it's unclear to me.
SNOWDON: So are they playing politics as well?
FREEDMAN: It seems so, perhaps they think this makes the opposition look bad, it looks like they're simply obstructionist.
SNOWDON: Japan like most other economies needs both houses of parliament to approve the appointment.
Elsewhere though, take the United States for example, it would be almost inconceivable to leave this important position vacant for political reasons.
Tokyo's solution is to slip one of the two Deputy Governors, Masaaki Shirakawa into the post temporarily.
While he's seen as capable, the vacancy, the first in Japan's post war history is embarrassing and destabilising, especially now.
A temporary arrangement can't be allowed to last long.
The government this week lowered its assessment for the economy.
It's a time when a respected permanent boss at the nation's central bank is needed. His first act might have to be to lower Japan's interest rates.
