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Japanese official: Economy slowing sharply

/ Source: The Associated Press

Japan’s interim central bank chief vowed Friday not to let the absence of a governor hamper the country’s economic and financial activities while another central bank official said the economy is slowing “sharply.”

The Bank of Japan has no governor after the opposition controlled upper house of parliament rejected two government nominations in a row, saying they were too politically connected as former Ministry of Finance bureaucrats to uphold the central bank’s independence.

The five-year term of former Gov. Toshihiko Fukui ended Wednesday.

A new central bank deputy head, Masaaki Shirakawa, whose nomination was approved last week, was named acting governor this week.

“We are in an unusual situation without a governor,” Shirakawa said at a press conference Friday. “But we cannot let the bank’s operations stall. I will fulfill my duties until a governor is appointed.”

Kiyohiko Nishimura, the bank’s other deputy governor, said Japan’s economic slowdown is getting worse.

“The economy is slowing quite sharply, even though it is on a mild expansionary trend,” he told the same press conference. “We need to manage policy extremely carefully.”

The political deadlock is being viewed as a major fumble in a nation preoccupied with appearances, especially on the international stage, amid global financial market turmoil that could require cooperation among central banks.

The political confrontation has brewed for weeks, although the world’s second-largest economy faces risks of slipping into recession, as a plunging dollar batters exports and soaring oil prices erode corporate profits.

Meanwhile, Economy Minister Hiroko Ota expressed hopes a new governor would be named soon while brushing off worries about any possible impact on the economy.

“In the current subprime credit crisis, it is important to be able to react to risks quickly,” she told reporters.

Japanese media reports said the selection of a new governor could drag into April, as some ruling party politicians are hopeful time may calm the outrage in the opposition.

Opposition lawmakers are angry the ruling coalition rammed through legislation that require approval from only the lower house of parliament. The nomination of Bank of Japan governor needs approval from both houses.

Last week, the opposition rejected the first candidate for central bank chief, former deputy central bank governor Toshiro Muto, and then voted down Koji Tanami earlier this week.