Japan DPJ's Maehara: wouldn't automatically reject Muto for BOJ governor

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By Yuko Yoshikawa and Linda Sieg | February 21, 2013 3:35 PM EST

Japan's main opposition Democratic Party of Japan would not automatically reject former top financial bureaucrat Toshiro Muto as the next Bank of Japan governor if his name is proposed, DPJ shadow finance minister Seiji Maehara said.

Maehara also told Reuters in an interview on Thursday that it was undesirable to have a top central banker who held extreme views about reflating the economy, but he declined to specify which potential candidates fell into that category. He added that he was in favour of easier monetary policy.

"I am not saying that Mr Muto is OK, but just because we rejected him five years ago does not mean we would automatically say 'no' this time," Maehara said. He did not give a direct answer when asked whether all members of the often-fractious party would agree with him.

Prime Minister Shinzo Abe has made clear he wants to replace outgoing BOJ Governor Masaaki Shirakawa, who steps down with two deputies on March 19, with someone who agrees with his push for aggressive monetary policy easing to escape persistent deflation.

But Abe is keen to avoid a rerun of the debacle in 2008 when the seat for the BOJ governor was left open for weeks. That means he needs support from opposition parties because his Liberal Democratic Party-led bloc lacks a majority in parliament's upper house, which must approve the nominees.

"It is important that the BOJ governor favour monetary policy easing but we think that an extreme reflationist is not desirable," Maehara said. He declined comment on the qualifications of any specific potential candidates including Muto and former government economist Kazumasa Iwata.

The government is aiming to decide the new BOJ line-up by the end of February. Appointing Muto would signal bolder steps to reflate the economy than those under Shirakawa but less aggressive than would be expected under Iwata.

Kazumasa Iwata, however, is seen as less extreme than some other potential candidates such as academic Kikuo Iwata. The two men are not related.

Maehara said it would be "a waste" if Asian Development Bank chief Haruhiko Kuroda, another possible candidate, left his job mid-stream since other Asian countries such as China or India would try to wrest the ADB post from Japan in that case.

The Democrats, who were ousted by the LDP in a December election, will evaluate candidates for the three BOJ posts as a package, which should include a policy expert, a former government official and an ex-BOJ official, Maehara said.

The Democrats rejected Muto as a candidate for BOJ governor in 2008, when they were the largest opposition group, arguing that appointing a former finance ministry official could compromise the central bank's independence.

(Additional reporting by Antoni Slodkowski; Editing by Edmund Klamann)

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