Muto leads as Japan PM close to choosing nominee for BOJ chief


The choice of Mr Muto, 69, would suggest the Bank of Japan (BOJ) will intensify stimulus efforts to reflate the economy, which has struggled with deflation for years, but refrain from the more radical measures advocated by other candidates.


A sharp yen decline since Mr Abe started pushing for bold BOJ measures has already sparked global criticism of Japan's policies.


Still, Mr Muto's selection is not a done deal, given the political manoeuvring needed to ensure parliamentary approval.


Mr Muto has long been considered a leading candidate to replace Mr Masaaki Shirakawa, 63, who steps down with his two deputies on March 19.


"Muto is considered as someone who would only follow the traditional approach such as expanding the BOJ's asset buying programme. It would merely be an 'enhanced' version of the conventional approach," said Mr Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "We cannot picture Muto going bold like buying foreign funds, a move that could accelerate yen declines."

Mr Abe, who led his party back to power in December with promises of aggressive monetary and fiscal stimulus, has said he wanted the new BOJ governor to pursue bold monetary easing. That gave rise to the view he may choose dark-horse candidates from academia who have advocated unorthodox policy measures, such as economics professor Kikuo Iwata.

The prime minister's short-list also includes Asian Development Bank head Haruhiko Kuroda, Japan's former currency tsar, and Mr Kazumasa Iwata, a former government economist who served as deputy BOJ governor alongside Muto.