Japan PM faces test over Bank post


JAPANESE Prime Minister Junichiro Koizumi faces a key test this week with the appointment of the next governor of the Bank of Japan, seen as crucial to the country's fight against deflation.

Koizumi has pledged to choose someone amenable to more inflationary policies. But he has been under pressure from conservative politicians and business groups to shun radical moves.

Political sources in Tokyo expect Koizumi to announce his decision at the end of a two-day Group of Seven finance ministers meeting in Paris, beginning on Friday. Outgoing governor, Masaru Hayami, who steps down on 19 March, has refused to allow the BoJ to heed Koizumi's pleas for an inflation target.

Names of likely candidates have been flying around Tokyo. The conservative Toshihiko Fukui has gained last-minute support from powerful business groups. Fukui, the highly respected former Deputy Governor of the bank, is also an avowed opponent of inflation targeting as a way of ending Japan's long deflationary spiral.

Hard-line economic reformers would prefer to see the job go to Nobuyuki Nakahara, a member of the bank's policy board.