Japan's government may nominate acting central bank governor Masaaki Shirakawa as permanent head of the bank, hoping that a candidate already approved by parliament will not be vetoed by opposition lawmakers, the Nikkei newspaper said on Friday.
Tokyo wants a new Bank of Japan head in place by next week, the government's top spokesman said on Thursday, in time for that governor to join a meeting of G7 finance leaders discussing the global credit crisis.
The government will likely put forward its new nominee on Monday, Japanese media have said, allowing time for approval in parliament ahead of the meeting of financial leaders of the Group of Seven leading industrial nations, expected to take place on April 11 in Washington.
"What needs to be decided quickly should be done so," Prime Minister Yasuo Fukuda told reporters late on Thursday.
The BOJ has been without a permanent governor for two weeks, after opposition parties that control parliament's upper house twice blocked former finance ministry officials nominated to replace retiring Governor Toshihiko Fukui.
The most likely proposal was to nominate career central banker Shirakawa, who was recently approved as deputy governor and is standing in as head of the BOJ, the Nikkei said, adding that the government knew it was unlikely to be successful with a third candidate who has previously worked at the Ministry of Finance.
Analysts have criticized Japanese lawmakers for squabbling over the central bank, saying it was unwise to have a stand-in governor in the midst of financial market turmoil, when central banks are working together to stabilize the situation.
A third failure by parliament to agree on a BOJ governor would undermine Japan's credibility, but sending a stand-in to the G7 was not ideal either, said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.
"Acting Governor Shirakawa cannot play a responsible role when it comes to making policy decisions such as a credit easing, and G7 leaders won't take his words seriously when they know he will be replaced by a new governor," he said.
The vacuum at the top of the BOJ comes amid coordinated central bank action to settle gyrating financial markets, and as U.S. Federal Reserve Chairman Ben Bernanke has conceded for the first time that the U.S. economy may slip into recession.
The Fed has slashed U.S. interest rates by 3 percentage points since mid-September with markets expecting another cut this month.
The BOJ, without a permanent governor in place for the first time since 1923, will hold its next policy meeting on April 8-9.
Most economists expect no interest rate cuts this year with the BOJ's key policy rate already at a very low 0.5 percent. But financial markets are less sure, with investors pricing in around a 25 percent chance of a rate cut by June and nearly a 55 percent chance by the end of the year.
Finance Minister Fukushiro Nukaga, who will also attend the G7 meeting, said it was important for Group of Seven finance leaders to confirm their shared view that excessive foreign exchange moves are undesirable for economic growth.
"I hope to exchange frank views on how to stabilize financial markets and the economy," Nukaga told a news conference after a cabinet meeting on Friday.