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Status Quo Expected From BOJ Nominee

February 25, 2003|From Reuters

Japan on Monday nominated Toshihiko Fukui, a policy conservative and career central banker, as head of the Bank of Japan, disappointing those who had hoped for radical action to fix the economy.

The news powered the yen to one-month peaks against the dollar and euro, as investors speculated that Fukui is unlikely to push policies that will result in a weaker yen.

Markets had hoped for a candidate who might take a more aggressive approach to the country's problems.

"Fukui does maintain the status quo. And so for those in the market looking for aggressive monetary policy directions from the next governor, they are likely to be disappointed," said Thio Chin Loo, senior currency analyst at BNP Paribas in Singapore.

"I think Fukui is the most consensual selection among the bureaucracy in Japan, so it's seen to be a safe choice."

The cautious decision was tempered by the tapping of two deputy governors who are expected to nudge the central bank toward more aggressive monetary policies.

Prime Minister Junichiro Koizumi's choice of a new head of the BOJ has been seen by many as a test of his leadership at a time when the economy is teetering on the edge of another recession.

In the 1990s, Fukui, then deputy BOJ governor, was seen as the most likely candidate to succeed then-head Yasuo Matsushita.

But he stepped down along with Matsushita in March 1998 to take responsibility for a BOJ official's arrest on suspicion of leaking market information to banks in exchange for lavish entertainment and golfing trips.

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