Yen Swings On Shifting Speculation About Next BOJ Governor

TOKYO (Nikkei)--The yen fluctuated wildly in the currency market Wednesday in light of confusion over who will become the next Bank of Japan governor.

The Japanese currency dipped to the higher 93 yen range against the dollar in the early morning, after some media reported that former Finance Ministry bureaucrat Toshiro Muto was no longer in the running for the job. Muto is seen as cautious about aggressive monetary easing, and the reports fueled yen-selling.

In the afternoon, however, the currency returned to the lower 93 yen range after Prime Minister Shinzo Abe told the upper house Budget Committee that the need to purchase foreign bonds as a means of monetary easing is weakening. Many market watchers saw this as leaving limited room for the yen to weaken further.

The market also took note of the small opposition Your Party's objections to appointing Kazumasa Iwata, an ex-BOJ deputy governor who advocates foreign bond purchases, to the position. Depending on whether other opposition parties decide to cooperate with the government, Your Party could hold great sway over the appointment.

Some also point out the seeming gap between Abe and Finance Minister Taro Aso is roiling the forex rate. After the prime minister touched on the possibility of foreign bond purchases Monday, the finance minister denied it the following day. Some observers speculate that Abe seeks to name Iwata as the next central bank leader, while Aso is pushing for Muto.

Abe is expected to submit proposals for BOJ governor and two deputy governor positions as early as Sunday, after returning from his trip to the U.S.

(The Nikkei, Feb. 21 morning edition)

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