Central bank politics -

Who will be the head of the Bank of Japan? The five year term of Governor Fukui is up in less than two weeks and there is no guess on who will lead the central bank. The Bank of Japan actually gained its independence relatively recently and this is a test of whether the monetary authority will be independent of the Japanese parliament. The likely successor is deputy governor Muto, but it is anyone's guess whether this will occur. Now some of the current problem in Japan has nothing to do with monetary policy. It is unlikely that the Bank will deviate significantly from its conservative stance, but this is an area that can become politicized.

The relationship between government and central bank is a problem that will grow as we enter more economic uncertainty around the globe. The central banks of the world have been left alone to follow strategies of inflation targeting and not worry about growth targets. If there are recessions in a number of countries, there will be more talk of having central banks that will focus on the growth side of the equation.