Bank of Japan Chief Apologizes for Scandal

The Associated Press
Tuesday, June 20, 2006; 7:16 AM

TOKYO -- Japan's central bank chief apologized to the nation Tuesday and said he would take a pay cut for an investment scandal that has set off calls for his resignation. He also said the bank has set up a committee to review rules for its officials' assets.

Gov. Toshihiko Fukui also said he would not step down and wanted to complete his job. His term runs through March 2008.

"I am very, very sorry. I deeply apologize to the people," Fukui said at a news conference. "The Bank of Japan's compliance rules have been widely criticized. This must be taken seriously."

Fukui has come under fire since stating last week that he had invested 10 million yen ($86,000) seven years ago in a fund managed by Yoshiaki Murakami, who was arrested June 5 on suspicion of insider trading.

While Fukui has broken no law, the incident has raised questions about the ethic standards for Japan's financial officials _ and comes at delicate time when the central bank is about to start raising interest rates amid signs of a long-awaited economic recovery here.

To show his remorse, Fukui said he will donate the profits he made from his investment to charity and will return 30 percent of his salary for six months.

The Bank of Japan said Tuesday the value of Fukui's investment more than doubled in nearly seven years to 22 million yen ($190,000), and his investment produced up to 4 million yen ($35,000) in annual profit.

A public outcry has erupted in recent days because Fukui has been perceived as making a tidy profit from the Murakami investment while ordinary Japanese have earned virtually no interest on their savings because of the Bank of Japan's zero percent interest-rate policy.

A weekend public opinion survey by Kyodo News agency showed that 49 percent of the respondents thought that Fukui should resign, while only 11 percent said the investment was not a problem.

The central bank says Fukui has not broken the law or violated the bank's internal regulations. He bought the Murakami Fund shares in 1999, while working at the Fujitsu Research Institute, a private think tank.

But some people have questioned the ethics of holding onto such investments after he became central bank governor in 2003.

Fukui defended his decision as a gesture of support to Murakami at a time when Japan's economy suffered from stagnation and insularity and needed new ideas.

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© 2006 The Associated Press