Bank of Japan critic Iwata gains traction

Two opposition parties said they will support Kikuo Iwata for Bank of Japan deputy governor, reducing the risk that Prime Minister Shinzo Abe will fail to win confirmation for all three of his central bank nominees.

The endorsements put Iwata above the threshold needed to win confirmation in the upper house of parliament, provided lawmakers follow their party’s recommendations. The main opposition Democratic Party of Japan Tuesday said it would vote against Iwata while supporting Haruhiko Kuroda as central bank governor and Hiroshi Nakaso for the other deputy post.

Abe needs opposition lawmakers to secure the new central bank leadership team, as the ruling coalition lacks an upper house majority. A rejection of Iwata, 70, who has advocated greater monetary stimulus since the 1990s, may reduce the number of BOJ board votes in favor of greater asset purchases as Kuroda presses for more easing.

“It could be a close call depending on whether the DPJ takes a unified stance against Mr Iwata or allows individual members to vote as they wish,” Kyohei Morita, chief Japan economist at Barclays Plc in Tokyo, wrote in a note to clients Tuesday. “We believe any stance that causes gridlock and delay could leave the DPJ vulnerable to public criticism ahead of this summer’s upper house election.”

While all three nominees are assured of passing the lower house, they need 118 votes to be confirmed in the upper house. Abe’s Liberal Democratic Party and coalition partner New Komeito have a combined 102 seats, while the DPJ has 87.

The Your Party, with 12 upper house legislators, and the Japan Restoration Party, with three, Wednesday endorsed Iwata and rejected Nakaso, while splitting on Kuroda. The New Renaissance Party, which is comprised of two upper house lawmakers, last month said it would back all three of Abe’s candidates. 

(Bloomberg)