March 19, 2008	Wednesday	Rabi-ul-Awwal 10, 1429

TOKYO, March 18: Japan’s government failed on Tuesday in a last-ditch attempt to avert a leadership vacuum at the country’s central bank amid a global credit crisis, as the opposition rejected its second candidate.

The government proposed Koji Tanami, head of Japan’s development lending agency, as Bank of Japan governor, but the opposition refused him because of his background as a former top finance ministry bureaucrat.

As a parliamentary hearing and vote would be needed for any third candidate, the deadlock means it is almost impossible for a new head to be appointed before governor Toshihiko Fukui retires on Wednesday night.

“There will be a vacuum in the seat,” senior opposition leader Yukio Hatoyama said.

“However, the real problem is whether we should take the risk of not benefitting the Japanese people by accepting a bad nomination.”

Hatoyama said that two new deputy governors, which were backed by the opposition, would serve in the interim if the top post comes open.

“We’ve consulted people on the markets and they said we shouldn’t be concerned,” Hatoyama said.

The main opposition Democratic Party of Japan (DPJ) already rejected one former finance ministry heavyweight, BoJ deputy Toshiro Muto, because of concerns he was too close to the government.

The opposition argues that people entrenched in the finance ministry bureaucracy are unlikely to preserve the independence of the central bank, which has often faced government pressure to keep interest rates low.

Japan’s interest rates, at 0.5 percent, remain the lowest among the world’s major economies.

But Prime Minister Yasuo Fukuda said he was simply choosing the best candidates for the job.

“I thought thoroughly about who would be appropriate for governor,” he told reporters.

“I don’t understand” the opposition’s stance, he added. “We have submitted a number of names.”

Earlier Tanami said he would strive to protect the central bank’s autonomy.

He needed the approval of both houses of parliament, one of which is controlled by the opposition.

“If I were offered an opportunity to assume the important post of BoJ governor, I would do my utmost to have an appropriate monetary policy while securing independence and transparency,” he told a parliamentary hearing.

“I believe that the Japanese economy has the strength to keep growing despite the global economic slowdown, although it has the challenge of a shrinking population,” he said.

But the opposition said it was concerned that Tanami was not up to the job.

“Systematic risks are spreading around the world without end. As this is coming right before a potential crisis, we just can’t get rid of questions about his ability,” said opposition lawmaker Yoshito Sengoku.

The Bank of Japan has been trying to ease strains on the financial system amid the market chaos.

The BoJ on Tuesday injected $4.1 billion of funds into the domestic banking system for a second consecutive day to curb rising interest rates.—AFP