Prime Minister Yoshihiko Noda’s nominee to the Bank of Japan (8301) board was rejected by the upper house of parliament in a victory for lawmakers pressing for more monetary easing to spur growth and end deflation.
BNP Paribas SA economist Ryutaro Kono was blocked by a vote of 127 to 111 in the house, where the ruling Democratic Party of Japan is a minority.
Japanese stocks pared losses on the decision, which leaves the central bank with two vacant seats on a nine-person board and gives lawmakers a platform for urging Governor Masaaki Shirakawa to take bolder action. The central bank has pledged “powerful easing” until a 1 percent inflation goal is in sight, while arguing that monetary policy alone is not enough to fix the economy.
“This shows political pressure on the BOJ is going to remain at an elevated level,” said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo and a former central bank official. “Politicians seem too extreme in their belief that the BOJ alone should take the task of ending deflation and that monetary policy alone can solve problems.”
The BOJ is likely to hold off on adding to asset purchases in a meeting that ends on April 10 after unexpectedly adding 10 trillion yen ($122 billion) to the program in February, according to a Bloomberg News survey of 13 analysts.
The Nikkei 225 Stock Average pared losses to 0.3 percent after earlier falling as much as 1.3 percent. The yen traded at 82.24 per dollar as of 2:08 p.m. local time, from 82.21 immediately before the decision.
