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DJ BOJ's New Leadership To Face Immediate Challenges - Nikkei
21 Mar 2008 19:39 GMT DJ BOJ's New Leadership To Face Immediate Challenges - Nikkei TOKYO (Nikkei)--The new Bank of Japan leadership faces numerous obstacles as it takes on the difficult task of steering monetary policy at a time of global financial market disarray and deteriorating economic conditions, The Nikkei reported in its Saturday morning edition. The absence of a governor at the helm - the result of a divided Diet in which the opposition-controlled upper house rejected two nominees - will also create challenges for the leadership's organizational duties. At a news conference Friday, new Deputy Governor Masaaki Shirakawa, who will also act as temporary governor, vowed to carry out his responsibilities to ensure that the BOJ's functions aren't affected by the vacancy. "I will do my utmost to fulfill my responsibilities as acting governor," pledged Shirakawa, who will also serve as the new chairman of the central bank's policy board. The absence of a governor and the promotion of policy board member Kiyohiko Nishimura to the other deputy governor post means that two seats on the nine-member board are vacant. "The board adopts good ideas that it finds from among the wide array of views expressed by its members, so holding discussions with nine members is very favorable," Shirakawa said. "It will be desirable to have things return to normal as quickly as possible," he added. As for current economic conditions, Shirakawa stated that his assessment is in line with the views the policy board presented in March under former Governor Toshihiko Fukui. "The Japanese economy is slowing, but overall, it remains on a gradual growth track," according to Shirakawa. But he also acknowledged the risk factors and high levels of uncertainty faced by domestic and overseas economies. To address this, "We'll adopt a modest yet comprehensive approach to analyze upside and downside risks for the price outlook," Shirakawa said. On the issue of monetary policy management, the central bank will examine interest rate conditions from a broad perspective, he noted. Due to rising resources and materials costs, small and midsize companies have seen their earnings erode, making it difficult for the central bank to steer monetary policy. But at a time when Japan's potential growth rate is somewhere in the mid- to upper-1% range, real interest rates of nearly zero may be too low theoretically, he indicated. On the other hand, "medium- to long-term rates and the interest rates at which firms raise funds also need to be viewed comprehensively," he added. Separately, Shirakawa praised the U.S. Federal Reserve Board's efforts to quell turmoil within the financial markets by cutting interest rates and arranging funding for cash-strapped financial institutions. (END) Dow Jones Newswires March 21, 2008 15:39 ET (19:39 GMT)