Japan PM Close to Choosing Nominee for BOJ Chief: Sources

Bank of Japan headquarters in Tokyo, Japan
Tomohiro Ohsumi | Bloomberg | Getty Images
Bank of Japan headquarters in Tokyo, Japan

Japanese Prime Minister Shinzo Abe is close to selecting his nominee for governor of the Bank of Japan and a decision could come in the next few days, sources close to the process told Reuters.

They said Toshiro Muto, a former finance ministry bureaucrat, is the leading candidate for the top job after the field of potential candidates was honed down.

The sources declined to be identified because the decision is still pending and discussions remain private.

(Read More: Aggressive Bank of Japan? Sooner Than You Think)

Muto, 69, has long been considered a leading candidate to replace Masaaki Shirakawa, 63, who steps down with his two deputies on March 19. Muto has experience steering fiscal and monetary policies and has close ties with ruling party lawmakers.

Abe and his advisers have limited the field of final candidates to two or three but have decided to exclude academic and private-sector economists in favour of those like Muto with bureaucratic experience.

That choice would suggest that while the BOJ will continue to ease monetary policy to beat deflation, it may not pursue some of the more radical measures that risked heightening tensions with Japan's Group of 20 counterparts who have said monetary policy should not target competitive currency devaluations.

(Read More: Come on G-20, Cut Japan Some Slack)

Abe has said he wants to choose a new BOJ governor who shares his views that the central bank should pursue bolder stimulus measures to end nearly two decades of deflation.

The nomination needs approval by both houses of parliament to take effect. Abe's ruling Liberal Democratic Party (LDP) lacks a majority in the upper house so needs the cooperation of opposition parties, some of which have opposed having a former finance bureaucrat at the BOJ's helm.

Currently chairman of private think-tank Daiwa Institute of Research, Muto rose through the ranks of the powerful Ministry of Finance to serve as its top bureaucrat before serving as deputy BOJ governor from 2003 to 2008.

(Read More: Why a Ho-Hum Bank of Japan Meeting Still Matters)

He was nominated by the LDP in 2008 to lead the BOJ, but his candidacy was struck down in parliament because of opposition by the Democratic Party.