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Fukuda Cabinet E-mail Magazine No.23 (March 21, 2008) ============================================================

"On the Bank of Japan Governor issue. This is Yasuo Fukuda."
-- Message from the Prime Minister
(Provisional Translation)

Prime Minister Yasuo FukudaProfile Japanese

On the Bank of Japan Governor issue. This is Yasuo Fukuda.

Today, for the very first time in the postwar era, the Bank of Japan does not have a Governor.

The appointment of the Governor of the Bank of Japan is subject to the consent of both the House of Representatives and the House of Councillors. However, in the current process of the selection of the next Governor we have been unable to obtain the consent of the House of Councillors, which is controlled by the Democratic Party of Japan (DPJ).

The global financial and economic situation is becoming increasingly uncertain due to various factors such as the sub-prime loan problem. As such, the vacancy in the top position of Japan's central bank is posing a severe strain, given the Bank of Japan's impact on the country's domestic finances and economy as well as on the nation's international credibility. I take my responsibility as seriously as the gravity of the situation demands.

Mr. Toshiro Muto has served as the Deputy Governor of the Bank of Japan for five years and enjoys the strong confidence of the business world and the markets. Mr. Koji Tanami, who is known to be a conscientious person, has demonstrated his abilities in the world of international finance, first as the Deputy Governor and then as the Governor of the Japan Bank for International Cooperation (JBIC), over a span of seven years.

Although both Mr. Muto and Mr. Tanami would be highly suitable as the next Governor of the Bank of Japan, a post that requires deep insight into finance and the economy and keen international awareness, the Cabinet was unable to obtain the DPJ's backing for either of them.

Some people questioned my proposals, asking me why I did not put forward a candidate to whom the DPJ could consent.

Were there to be proposals from the DPJ, I would at any time be open to considering them. Indeed, many DPJ members have stated their personal opinions, yet not one of them has ever mentioned, as the party line, the name of any person they consider to be suitable as the next Governor of the Bank of Japan.

Without any indication of who, specifically, the DPJ would deem fit for the role of Governor, I concluded that my only course of action was to propose candidates who I believe to be best qualified for the post.

Former Prime Minister Osachi Hamaguchi once said, "I only walk the right path," when he took an uncompromising stance against the prewar military establishment in his efforts to bring about disarmament.

I could have attempted to reach a political compromise to fill the void at the top of the Bank of Japan by appointing an innocuous person. But my conviction, on the contrary, was that I should hold fast to selecting the right candidate on the basis of actual qualities and abilities, because the person assuming the responsibilities of Governor of the Bank of Japan will have a major influence on the Japanese economy and the lives of the people.

I am aware of the criticism as to why I choose candidates from among former officials of the Ministry of Finance.

Why should we pass over the best available candidates merely because they were former officials of the Ministry of Finance? My decision was to put the right person into the right job based solely on the perspective of choosing someone, regardless of his or her personal history, who would best serve the interests of the Japanese economy.

It is absolutely true that the Ministry of Finance and the Bank of Japan must make their decisions independently, but that does not mean that fiscal policy and financial policy should be totally separated from each other. Coordination between the two organizations is important, and particularly so now, considering the current economic circumstances.

In any case, this current predicament has resulted in Japan sending out a message to the world that it is unable to make a politically important decision.

If the only attitude that is brought to bear is one designed to use up the Diet's time by practically vetoing proposals, then our responsibility as politicians to the public cannot be discharged.

In politics we bear responsibility for the consequences of our actions, and I am responsible for the fact that the vacancy in the post of Governor of the Bank of Japan has arisen. At the same time, I consider it my mission and my responsibility to normalize the situation at the Bank of Japan and political conditions at the earliest possible juncture.

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General Editor: Prime Minister Yasuo Fukuda
Chief Editor: Deputy Chief Cabinet Secretary Matushige Oono
Publication: Cabinet Public Relations Office
1-6-1 Nagata-cho, Chiyoda-ku, Tokyo 100-8968, Japan

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