Quick, name the world's fastest-growing major developed economy. It's not in Europe, and it's not the U.S. Surprise, it's Japan, which turned in an impressive 6.4% annualized gain in the final quarter of last year. Much of the credit belongs to Fukui, who just completed his first year as head of the Bank of Japan. "Out of 100 points, I give his performance a 99," says Jesper Koll, chief Japan analyst at Merrill Lynch in Tokyo. Some have gone so far as to call Fukui, 68, the best central banker in the world.
Credit Fukui's success to unconventional thinking. His predecessor, Masaru Hayami, frequently claimed there was little he could do to stoke Japan's economic fires after he lowered interest rates to zero. But Fukui has boldly set out a series of unorthodox monetary-easing programs designed to counteract the country's crippling six-year bout of deflation, flooding the nation with cash. "Fukui has been activist and interventionist," says Shuji Shirota, an economist at the Dresdner Kleinwort Wasserstein investment bank in Tokyo. Fukui's efforts are having an impact: consumer-price deflation slowed to 0.3% last year, compared with 0.9% in 2002.
Fukui is also the first Bank of Japan governor in years not to brawl openly with other branches of the government. "For the first time in a long time, Japan has something approaching integrated monetary, fiscal, banking and competitiveness policies," says Koll. But few doubt that Fukui's greatest challenges lie ahead of him. With the economy picking up, a rise in interest rates seems likely. Japan's recovery remains fragile, however, and hiking rates in an economy accustomed to free money is risky. Still, the world's second largest economy is finally battling back with conviction. The question now is whether Fukui and Japan can complete the job.
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