2012.06.18 07:56:28 INTERVIEW: LDP Deputy Policy Chief Suggests Party Likely to OK BOJ Board Nominees

--Japan's largest opposition party likely to accept government
proposals on BOJ board members, LDP deputy policy chief suggests

--BOJ should strengthen fight against deflation by raising price goal
to 2% from current 1%, LDP's Yoshimasa Hayashi says

--Mr. Hayashi likely to stand in LDP leadership election in September


By Takashi Mochizuki

TOKYO--Japan's largest opposition party is likely to accept the
government's latest proposed candidates for two vacant Bank of Japan
policy board seats, a senior party official said Monday, adding that
the central bank should further beef up its fight against deflation.

"I haven't heard any objections from within the party," Yoshimasa
Hayashi, deputy chairman of the Liberal Democratic Party's policy
research council, said in an interview with Dow Jones Newswires.

The government last week tapped Nomura Securities chief economist
Takahide Kiuchi and Morgan Stanley MUFG Securities chief Japan
economist Takehiro Sato for the BOJ openings. Both candidates are seen
as more sympathetic to further easing by the central bank to fight
deflation.

Japan's parliament is set to vote on the proposed appointments later
this week. LDP opposition to a previously proposed candidate was
instrumental in his rejection by parliament.

Mr. Hayashi's comments on the proposed appointments, together with
expressed party support from lawmakers within the ruling Democratic
Party of Japan, suggests the two economists will be appointed. The two
policy board positions have been open since the terms of Hidetoshi
Kamezaki and Seiji Nakamura came to an end in April.

Prime Minister Yoshihiko Noda previously proposed the appointment of
BNP Paribas Securities chief economist Ryutaro Kono but the Diet
rejected Mr. Kono, who was seen as having an anti-easing stance. Most
LDP members voted against Kono's appointment.

With a stubbornly strong yen and persistent long-running deflation,
lawmakers have recently become increasingly vocal in demanding the
central bank ease its monetary policy. Such political pressure is seen
as a major factor behind BOJ easing steps, such as the most recent
move in April.

But Mr. Hayashi said the BOJ should do more, saying April's measures
to increase its asset-buying program by a net 5 trillion yen ($63.07
billion) and lengthen maturities of bonds the bank buys "are not the
end of the story."

He said the BOJ should beef up its its anti-deflationary fight by
increasing its purchases of Japanese government bonds and by targeting
2% price growth rather than setting a lower price "goal" of 1%.

The BOJ's policy board on Friday voted to keep its monetary policy
unchanged, saying it will continue with its Y70 trillion asset
purchase program--its main tool for monetary easing.

Mr. Hayashi, who has served as economy minister and defense minister,
is likely to stand in a party leadership race scheduled for September.
Despite gaining enough recommendations from other LDP lawmakers to be
a candidate in the previous party poll, he didn't stand. But this time
round, he says he won't "run away" from the opportunity if he again
collects enough recommendations to be a candidate.


Write to Takashi Mochizuki at takashi.mochizuki@dowjones.com


(END) Dow Jones Newswires

June 18, 2012 01:56 ET (05:56 GMT)