Central Banks

Japan Government to Nominate BOJ Head After PM's US Trip This Week

Kiyoshi Ota | Bloomberg | Getty Images

Japanese Economics Minister Akira Amari said on Tuesday that the government will nominate a governor and the deputy governors of the Bank of Japan after Prime Minister Shinzo Abe returns from a trip to the United States on February 21-24.

Abe has demanded more aggressive action from the central bank to end years of deflation and lift the world's third-biggest economy out of recession. Financial markets are waiting to see if he nominates a candidate who would support the bold policy action he has called for, or if he has to compromise and choose a more moderate policymaker.

(Read More: Abe's Push for Radical BOJ Head Meets Resistance)

"After Prime Minister Shinzo Abe returns, we will lay the ground work to reach an agreement with opposition parties within this month," Amari told a news conference after a cabinet meeting.

Sources have told Reuters that former top financial bureaucrat Toshiro Muto is the leading candidate to become Japan's next central bank governor, replacing Masaaki Shirakawa.

Abe said on Monday that the new BOJ governor should be someone with strong determination and ability. He suggested that revising a law guaranteeing the central bank's independence was possible if the authority failed to act aggressively enough.

Abe's push for more aggressive action has weighed on the yen and bolstered the stock market as investors anticipate a weaker currency will bolster earnings of the country's exporters.

(Read More: Look Out! Correction Looms for Soaring Nikkei)

Amari said purchasing of foreign bonds by a central bank is an option available to each country. His comment followed Abe's remarks on Monday that buying foreign bonds, considered an extreme measure by many officials, may be one policy option for the BOJ.