The Bank of Japan governor has admitted keeping an investment in the fund of high-profile investor Yoshiaki Murakami, who was arrested earlier this month on allegations of insider trading.

Forty percent believe that Fukui should resign over the scandal, said a survey carried out jointly by the Yomiuri Shimbun, Japan’s best-read daily, and NTT Resonant Inc., an Internet service company.

Another 27 percent said they agreed with Fukui’s decision to take responsibility by returning part of his salary and eight percent think his earlier apology was sufficient, it said.

Only 14 percent said the scandal did not require the central banker to take responsibility, with the remainder giving other responses.

The poll looked at responses from 803 people selected as representative out of a larger sample pool.

Fukui has said he will not pocket any of the profit from his investment and will give up 30 percent of his salary for the next six months.

He has rejected calls for his resignation made by the opposition and received the backing of the government and prominent business leaders, who largely praise his handling of the economy since he took office in 2003.

Murakami had been seen as a trailblazer for launching Japan’s first aggressive takeover bid and campaigned on behalf of shareholders’ rights.

Fukui, who was in the private sector when he put in 10 million yen (87,700 dollars), defended his investment, saying he wanted to support entrepreneurship and did not suspect any wrongdoing at the time by Murakami.

Murakami was arrested on June 5 on allegations of insider trading related to scandal-tainted Internet firm Livedoor.

SOURCE: AFP

Opposition lawmakers have called for Fukui’s resignation, saying he was unethical to have kept an investment in the fund of controversial manager Yoshiaki Murakami who was arrested on insider trading charges.

“Many analysts believe the central banker’s scandal could affect policy management itself,” said the Tokyo Shimbun newspaper. “Needless to say, governor Fukui has responsibility to explain what happened.”
Despite the two-day policy board meeting, the opposition has asked Fukui to appear before a parliamentary committee Thursday over the scandal.

However, the government came in support of the central banker, who has been popular in financial circles since his appointment by Prime Minister Junichiro Koizumi in 2003.

“Our understanding is that he fully explained the situation. I believe the government and ruling party members in general have understood the situation,” said Chief Cabinet Secretary Shinzo Abe, the government spokesman.

“We want the governor to fulfill his duties with the trust of the Japanese public,” said Abe, seen as a likely successor to Koizumi later this year.

Fukui has developed a complicated relationship with Koizumi, who openly questioned his plan to end the five-year policy of “quantitative easing,” under which the Bank of Japan flooded the financial system with cash to offer easy credit.

But in a show of independence, the central bank went ahead with a policy change in March, saying the economy has revived from its decade-long rut and no longer needed the highly unusual policy.

The central bank is expected this summer to follow up by raising interest rates, which are now nearly zero, again prompting concern by the government which cautions that the economy remains fragile.

Fukui’s scandal could lead to greater influence of the government over the central bank, said the Mainichi Shimbun.

“This may cast delicate shades of meaning to the independence and credibility of the Bank of Japan,” the newspaper said.

The central banker admitted Tuesday in the face of opposition charges that he invested 10 million yen (87,700 dollars) in 1999 in the Murakami fund when Fukui was in the private sector.

He said he earned an undisclosed profit and cancelled the contract well before last week’s arrest of Murakami, a former bureaucrat turned activist for shareholder rights.

The Nihon Keizai Shimbun, Japan’s business daily, noted that many central banks abroad publicized the assets of their governors.

“Because of the lack of written, clear rules, the problem happened this time,” it said, adding that Fukui broke no laws.

But the liberal Asahi Shimbun said that even if the investment was legal, “he should have got rid of the investment appropriately when he became the BoJ governor.”

“The head of the central bank, which has power to influence the flow of funds in the Japanese economy, should be extra careful even if it is a personal investment,” the Asahi said in an editorial.

SOURCE: AFP

Top cabinet members including Prime Minister Junichiro Koizumi sought to reassure investors that Japan’s economy is in solid shape after the Nikkei index fell over three percent Thursday — its biggest one-day loss this year.
“The Japanese economy is on a recovery path,” Koizumi said.

Kaoru Yosano, state minister in charge of economic and fiscal policy, also said the nation should not become pessimistic over stock prices.
“The time of volatility will last for some time but the market will start reflecting the fundamentals of the Japanese economy after that,” he said.

Following the government’s call, BoJ deputy governor Kazumasa Iwata said the central bank was not accelerating the process of draining excess cash from the banking system following the end to its ultra-loose monetary policy.

At the same time he indicated that the BoJ would continue to move toward an end to its zero interest rate policy despite the stock market plunge.
“We have not changed our view that interest rate levels will be gradually adjusted as the nation’s economy is shifting to a normal state from deflation despite the current movement of asset prices,” Iwata told a news conference in the city of Akita, as quoted by Kyodo News.

In an earlier speech Iwata dismissed concerns about falling stock markets, saying: “As investors’ position adjustments calm down, the stock and bond markets will recover stability.”

SOURCE AFP