Seppuku is Passé

21 June 2006



BoJ Governor Tied to Murakami Fund Scandal, Keeps Job

Bank of Japan Governor Toshihiko Fukui has apologized to the nation for having invested in a fund managed by Yoshiaki Murakami. Mr. Murakami was arrested June 5 on suspicion of insider trading. Mr. Fukui has done nothing illegal. He has done something very wrong. He should resign.

Seven years ago, Mr. Fukui worked at the Fujitsu Research Institute, a private think tank. While employed there, he bought shares in the Murakami Fund. In 2003, Mr. Fukui became central bank governor. Rather than liquidate his investment, Mr. Fukui kept the shares arguing that doing so was a vote of confidence in the Murakami Fund’s entrepreneurship. In February of this year, he asked to liquidate his position, and effective at the end of this month, he will be out of it.

In the intervening years, his ¥10 million (US $86,000) investment has grown to ¥22 million (US$190,000), and he has earned ¥4 million (US$35,000) in annual profit. His critics in Japan are angry at this kind of result while the BoJ’s zero percent interest rate has brought savings account holders nothing.

Mr. Fukui is giving up all his profits and 30% of his salary for the next 6 months as a show of remorse. “I realize there is serious criticism and I accept it fully,” he said. “I have always acted with strong integrity.” Opposition politicians have called for his resignation, while Prime Minister Junichiro Koizumi wants his to stay on through the end of his term in 2008.

This isn’t Enron, or Livedoor, or any other multi-billion dollar boondoggle. The sums are small by those standards. The trouble is the BoJ is seen as being led by a man who is tainted. Credibility is the greatest asset any central bank has. When that is lost, policy becomes much less effective. Mr. Fukui’s integrity is in question as well as the Bank’s, and the best way to restore both of those is for Mr. Fukui to do more than give up a little money. Seppuku is a bit extreme, but a resignation would be about right.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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