Japan's Ruling Party Is Divided Over The Most Important Economic Decision It Has To Make

Shinzo Abe

Photo: flickr / Takato Marui

Japan’s Nikkei has been on a surge in recent months, and there are even signs now that consumer confidence is starting to spike.This is all because the new administration has promised to get the Bank of Japan using aggressive monetary policy to stimulate the economy.

So the crucial decision that Prime Minister Shinzo Abe must take is: Choosing the next leader of the Bank of Japan.

And it turns out that Abe’s party (LDP) is divided on the question of whom to select.

Abe wants someone who favours radical, unconventional measures. Finance minister Taro Aso wants someone who is more conventional. And he recently stated this desire in a speech.

From Jonathan Soble at FT:

Mr Aso is believed to favour a career civil servant with management experience and political connections, while Mr Abe is open to academics with a willingness to experiment with unorthodox policies.

A government official close to the process said there was “no question that a tense discussion is occurring” between the prime minister and finance minister.

Beyond their differences over foreign bond-buying, Mr Abe and Mr Aso have diverged over whether to revise the central bank law to weaken the BoJ’s independence – Mr Abe has kept the threat alive, while Mr Aso said on Tuesday the government has “no plans” to do so.

The Japan “story” is all about a Bank of Japan that will no longer fall into its old funk. But the idea of selecting someone who will basicaly be a repeat of the past has always been a risk, especially since Japan’s current government is filled with past figures, including Abe himself, who had previously been PM.

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