The Bank of Japan's governor, Mr. Masaru Hayami, is to retire in late March when his five-year term expires. At the moment, who will succeed him is a matter of speculation. There is no question, however, that the next governor will face the same difficult challenge that has confronted the outgoing governor: curing the insidious deflation that continues to plague the Japanese economy.
Prime Minister Junichiro Koizumi, asked at a press conference the other day what type of person he will pick as the new BOJ chief, said he prefers a "person who is positive about fighting deflation and well-informed about the international situation." Economics Minister Heizo Takenaka says he favors an "activist who will pursue monetary policy aggressively while sharing the same sense of crisis (as the government) in the battle against deflation."
The Bank of Japan Law states that the governor will be appointed by the Cabinet with the consent of the Diet. This means, for all practical purposes, that the prime minister has the authority to select the head of the central bank. Prime Minister Koizumi will have to make the best choice possible from a wide field of candidates, bearing in mind the central bank's independence as well. The last thing he should do is name a "yes man" for the government.