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2ND LD: DPJ may reject gov't nominee for next BOJ chief: Ozawa.

MORIOKA, Japan, March 1 Kyodo

(EDS: ADDING BACKGROUND AT 5TH AND BOTTOM 3 GRAFS)

Democratic Party of Japan President Ichiro Ozawa indicated Saturday the main opposition party may reject the nominee of the ruling coalition parties and the government for the next Bank of Japan chief.

''Relations of trust with the government and the ruling bloc have been completely lost,'' Ozawa told a news conference in Morioka, Iwate Prefecture, in reference to the passage Friday of the state budget and tax reform bill for fiscal 2008 in the lower house despite opposition from the DPJ and other opposition parties.

The government is widely expected to propose Deputy Bank of Japan Governor Toshiro Muto as successor to Toshihiko Fukui as the head of the central bank as early as next week. Fukui's five-year tenure ends March 19.

Ozawa was apparently indicating his party may refuse to endorse Muto as the next BOJ chief.

The appointment of the BOJ chief requires Diet approval. The opposition-controlled House of Councillors can block the government's nomination even if it is approved by the more powerful House of Representatives where the ruling coalition parties hold a majority.

The opposition camp has been reluctant to let Muto take the helm of the central bank on the grounds that his background as a former vice finance minister could hurt the independence of the BOJ in making monetary policy decisions. Through recent negotiations, however, there were signs emerging that the opposition camp might accept Muto's nomination.

But, given that the government's budget plan and tax reform plan cleared the lower house without the opposition bloc's support, Ozawa apparently is taking a tougher line.

''Whether it is the BOJ chief nomination (issue or something else), there is not a situation where ruling and opposition parties can talk in a calm manner,'' he said.

Ozawa did not mention Muto by name as the government's candidate for next BOJ chief.

In Tokyo, a senior DPJ official told reporters that his party is ''100 percent'' certain not to endorse the government's nomination of Muto.

''It is Mr. Ozawa's intention. If (the ruling camp) forcibly passes the budget plan, a successful nomination of next BOJ governor will become a dead issue,'' he said.

Asked what would happen if the office of the BOJ chief is left vacant due to trouble with selection, Ozawa said in Morioka that it is the government that should take the blame.

''It won't cause much practical trouble (to the BOJ's day-to-day affairs) but its reputation will certainly be damaged domestically and internationally,'' Ozawa said.

Concerns have been aired in political and business circles that a leadership vacuum at the BOJ could damage the central bank's credibility at a time when global financial markets are in turmoil due to the U.S. subprime mortgage crisis.

The lower house on Friday passed a state budget plan and a tax reform bill for fiscal 2008 with a majority vote by the ruling parties. The opposition bloc excluding the Japanese Communist Party boycotted the vote, claiming there had been insufficient deliberation on the bills.

The bills are now before the upper house. Even if the upper chamber does not approve them, the state budget will be enacted 30 days later as stipulated by the Constitution.
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Publication:Japan Policy & Politics
Geographic Code:9JAPA
Date:Mar 2, 2008
Words:542
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