/www.bloomberg.com/ By Tak Kumakura, Daisuke Takato and Kanako Chiba
Tokyo, Feb. 24 (Bloomberg) -- Japanese Prime Minister Junichiro Koizumi will pick Toshihiko Fukui as the next central bank governor, the Yomiuri newspaper said, without citing anyone. Koizumi denied that he's made his choice.
``I haven't decided on the BOJ nomination yet,'' Koizumi told reporters at the country's parliament, repeating the answer when asked whether he was considering to Fukui for the job.
Finance Minister Masajuro Shiokawa said the decision on a new BOJ chief may be announced as soon as this afternoon. Koizumi said he plans to talk with Chief Cabinet Secretary Yasuo Fukuda on the nomination today before heading for South Korea.
The choice of a new Bank of Japan governor will be one of the biggest opportunities Koizumi has this year to influence economic policy, analysts said. The government has repeatedly complained that current incumbent Masaru Hayami, whose five-year term ends March 19, has done too little to increase money supply to stem the slide in prices.
Fukui, a former vice governor of the Bank of Japan, has spoken out against the bank setting an inflation target as a way to end four years of falling prices in Japan. The choice of Fukui, who is now head of the Fujitsu Research Institute, may be viewed as a disappointment, some investors say.
``The market would benefit from a new BOJ governor who is (more) keen on fighting deflation than the current one,'' said Scott McGlashan, chairman of U.K.-based Jade Absolute Fund Managers, which handles about $125 million in assets.
Shiokawa has given Koizumi about 10 candidates' names, the finance minister told reporters this morning at the Diet. He declined to disclose any of the names.
Nikkei Rises
The Nikkei 225 Stock Average rose 90, or 1.1 percent, to 8603.04 as of the lunchtime break in Tokyo. The Topix index added 2.66, or 0.3 percent, to 842.77.
The yen rose to 118.44 against the dollar at 11:55 a.m. in Tokyo, from 118.70 late Friday in New York. The yen also rose against the euro to 127.17 from 127.84. ``The impact on the market will be just temporary,'' said Eishi Yokoyama, an economist at AIG Global Investment Corp. ``The bottom line is that there is little monetary policy can do to lift the economy now.''
Koizumi told a parliamentary session today that he wants to name someone to head the BOJ who will ``aggressively'' fight the country's deflation.
Fukui said in an interview in December that an inflation target is just one of many policy tools the bank can use to boost an economy wracked by three recessions in a decade. Current BOJ governor Hayami is opposed to setting inflation targets.
Pit Trap
``Deflation is something like being trapped in a pit and we can't get out of it unless everyone plays his or her own role,'' Fukui said in the December interview. Proponents of an inflation target ``never explain specifically how we can get out of a hole with a target,'' he said.
While Fukui is seen as an establishment candidate, the choice of Kazumasa Iwata as deputy governor, as reported in the Yomiuri, would be unprecedented in Japan, said Marshall Gittler, head of foreign-exchange strategy at Deutsche Bank AG in Tokyo. Iwata, a Cabinet official, has lobbied for aggressive monetary easing, said Gittler.
``Up to now the governor and the deputy have always agreed with each other. Here they would have totally different views,'' said Gittler.
BOJ Return
Fukui, 67, became vice governor of the Bank of Japan in 1994 and resigned from the position in 1998 after a senior BOJ official was arrested on bribery charges.
Japan's parliament must approve the nomination of the central bank chief.
``Everybody is anxious to know, so the decision should be made as soon as possible,'' Fukuda said at a daily press conference. ``There are several candidates, but that's all I know.''
The earnings and asset value of Japan's companies have shrunk during Japan's three recessions since 1991, with both the Nikkei 225 Stock Average and land prices falling about 70 percent in value. Nationwide consumer prices, excluding fresh foods, haven't risen since April 1998.