(Agencies)
Updated: 2008-03-19 13:38

RATE CUT IN APRIL?

Economists noted that the acting governor, most likely to be Deputy Governor Masaaki Shirakawa, would be in charge at the central bank for now and Goldman Sachs said it expected a rate cut next month even if a permanent leader was not put in place.

"The turbulence surrounding the new governor and deputy governors need not be a major impediment to an emergency rate cut or April easing," the investment bank said in a research note.

Japanese interest rates, at 0.5 percent, are already near rock bottom, but Goldman said it looked as if the country had been in recession since the last quarter of 2007 with US economic weakness and abrupt rises in the yen seen as adding impetus for a rate cut.

The political deadlock comes in the middle of coordinated central bank action, deep rate cuts by the US Federal Reserve and gyrating currency, bond and share markets, and has raised concerns that Japan might be unable to act swiftly on monetary policy if needed.

Both Tanami, the nominee rejected on Wednesday, and Toshiro Muto, the nominee who opposition parties rejected last week, were once vice ministers at the finance ministry.

"We said from the beginning that the BOJ personnel should not be an object of political feuding and that a vacuum should not be created. The government's clumsy handling is to blame for the result today," said Kenji Yamaoka, a senior Democratic Party lawmaker.

Political analysts said they were stunned that Prime Minister Yasuo Fukuda, having seen one former top finance ministry official vetoed in parliament's opposition-controlled upper house, then nominated someone with nearly the same credentials.

Japanese media were just as scathing about the political paralysis in a parliament split between an overwhelming majority for the ruling coalition in the lower house, with opposition parties in control of the upper house.

"The lack of policies of Prime Minister Fukuda and the irresponsibility of Democratic Party leader (Ichiro) Ozawa have given birth to an outrageous, directionless drama in which the people are ignored," the Nikkei business daily said in an editorial.

"The loss of confidence in Japan among the international community will be immeasurable. And the Fukuda administration will suffer a big blow," it said.

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