March 14, 2013 / 4:23 AM / 5 years ago

Japan lower house approves BOJ nominees, upper house votes Friday

TOKYO (Reuters) - Japan’s lower house of parliament approved Haruhiko Kuroda as the next governor of the Bank of Japan on Thursday, heralding a shift to more aggressive monetary easing aimed at ending nearly 20 years of deflation.

The Japanese government's nominee for Bank of Japan (BOJ) governor Haruhiko Kuroda attends a hearings session at the upper house of the parliament in Tokyo March 11, 2013. REUTERS/Issei Kato

The lower house also approved government nominees Kikuo Iwata and Hiroshi Nakaso to serve as the BOJ’s two deputy governors. Passage was guaranteed in the lower house, where Prime Minister Shinzo Abe’s ruling Liberal Democratic Party (LDP) has a majority.

The LDP lacks a majority in the upper house, but the government’s nominations are expected to be passed by that chamber on Friday with support from opposition parties.

Approval in both houses of parliament is necessary for the nominees to take control of the central bank after its current leadership steps down on March 19.

Kuroda, 68, and Iwata, 70, spoke at confirmation hearings in favor of buying government debt with longer durations to expand the BOJ’s balance sheet and boost inflation expectations.

Nakaso, 59, also supported increased asset purchases to meet Prime Minister Shinzo Abe’s ambitious target of 2 percent inflation.

The BOJ has agreed to buy assets or make loans totaling 101 trillion yen ($1.1 trillion) by the end of this year, part of which includes buying government bonds with a maturity of up to three years.

Expectations are growing that Kuroda will move quickly to extend the duration of Japanese government bonds that the central bank buys at the next scheduled meeting on April 3-4.

Abe picked the three nominees to fulfill his pledge to overhaul monetary policy and shake off persistent deflation, a symptom of years of stop-start growth.

Kuroda is a career bureaucrat from Japan’s finance ministry and will leave his position as president of the Asian Development Bank to lead the BOJ.

Iwata is an academic who has studied inflation targeting and shares Kuroda’s view that the BOJ needs to increase debt purchases to reach 2 percent inflation in two years.

Nakaso has spent his career as an official at the BOJ and sees further room for monetary easing, but he is considered to be more conservative than Kuroda and Iwata.

Abe’s policy prescriptions of monetary and fiscal stimulus, dubbed Abenomics, have so far helped drive the yen to 3-1/2 year lows against the dollar, supporting exports.

Under relentless pressure from Abe, the BOJ said in January it would switch to open-ended asset buying from 2014 to achieve the 2 percent inflation target.

Editing by Alex Richardson

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