Japan's Shinzo Abe to Decide on BoJ Chief After US Trip

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By Prasanth Aby Thomas | February 19, 2013 6:32 PM EST

A Japanese flag flutters atop the Bank of Japan building in Tokyo

Japan's economy minister Akira Amari has said that the government will announce its nominee for the post of Bank of Japan governor and deputy governor after Prime Minister Shinzo Abe returns from a trip to the US.

"After Prime Minister Shinzo Abe returns, we will lay the groundwork to reach an agreement with opposition parties within this month," said Amari in a press conference following a cabinet meeting. Chief Cabinet Secretary Yoshihide Suga also indicated that the nomination announcement could be next month.  

A range of issues including security and economic growth concerns are expected to dominate the discussions between Abe and Barack Obama during the former's visit to the United States, scheduled for 21-24 February.    

The decision on the central bank chief is extremely significant at the moment as the government looks to shore up Japan's ailing economy.

Abe, who had pressurised BoJ to raise inflation targets and to take up-open ended asset purchase plans, is expected to look for a dovish head for the lender. The final decision could provide early indications on the direction of the administration's stimulus plans and have a major impact on financial markets.

Earlier this week, Abe mentioned that the next central bank chief should be someone with strong determination and suggested a revision of the legislation on BoJ's independence if officials fail to take strong steps to boost the economy.

According to a Reuters report that cited unnamed sources, former top financial bureaucrat Toshiro Muto is the major contender to replace the current governor Masaaki Shirakawa.

The global economic downturn that hurt demand, along with stubborn deflation levels, have proved damaging to the country's growth. Official data released earlier this month had shown that the economy shrank 0.4 percent year-on-year in the third quarter.

But conditions had begun to improve after the Abe-led government took office in December. The government's stimulus rhetoric has pulled the yen sharply lower in the recent months triggering fears of a possible "currency war". Though the government escaped being on the receiving end of criticism at the recent G20 meet, analysts suggested that the administration would be cautious in the future.

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