By Stanley White and Leika Kihara
TOKYO (Reuters) - Japanese government leaders reaffirmed their confidence in Bank of Japan Governor Haruhiko Kuroda on Tuesday, bolstering expectations that he will be reappointed for a rare second term.
A source told Reuters over the weekend that Prime Minister Shinzo Abe would nominate Kuroda for another five-year term when this one expires in April, a sign that ultra-loose monetary policy will remain in place.
Abe said on Tuesday he hadn't decided yet whom to pick as next BOJ governor, but rebuffed calls from an opposition lawmaker to replace Kuroda given the pain the BOJ's negative interest rate policy was inflicting on commercial banks.
Finance Minister Taro Aso said the next central bank governor would need English skills to deal with global financial issues, taken as an endorsement of Kuroda, who had been a financial diplomat on the world stage for decades.
The government’s support for Kuroda suggests the focus of attention will now shift to such questions as the choices of the deputy governors and the gruelling task that awaits Kuroda, who at 73 looks on course to become Japan’s longest-serving central bank chief.
"Surveys show banks' lending attitudes to small- and medium-sized companies remain healthy even after the introduction of negative rates," Abe told parliament.
"I expect the BOJ to continue to take bold steps to achieve price stability in response to movements in prices and the economy," he said, underscoring dominant market views the transition won't lead to an early withdrawal of stimulus.
Aso told the same parliamentary committee that speaking fluent English was a "very important condition" to head the BOJ, as well as communication skills to explain monetary policy in parliament and the stamina to travel overseas.
Formerly head of the Asian Development Bank and top Japanese currency diplomat in a career with Japan's Finance Ministry, Kuroda speaks fluent English and is known to have cultivated deep contacts with global policymakers.
Media reports, confirmed by a source, said the government had decided to nominate Kuroda for another five-year term as BOJ head when his current one expires in April. The government is set to present the nomination to parliament later this month, the source said.
Many market participants had expected Abe to reappoint Kuroda after the premier frequently publicly praised the governor for creating more jobs and reflating the economy.
"Abe's signals suggest he was requesting Kuroda to serve another term," said Mari Iwashita, chief market economist at Daiwa Securities.
"It's natural for the government to seek a choice that won't cause unnecessary turbulence in markets," she said.
Kuroda reiterated on Tuesday the BOJ's resolve to maintain its massive stimulus programme with inflation still distant from its 2 percent target.
The market's attention is shifting to who will fill the two deputy BOJ governor posts opening up in March, when the terms of career central banker Hiroshi Nakaso and former academic Kikuo Iwata expire in March.
Some media reported that BOJ Executive Director Masayoshi Amamiya, known for masterminding various BOJ policies, will succeed Nakaso. Analysts say the other vacancy will be filled by an advocate of massive monetary and fiscal stimulus measures, such as Abe's former aide, Etsuro Honda.
Kuroda, hand-picked by Abe to pull Japan out of deflation, deployed a huge asset-buying programme in 2013 that helped boost business sentiment but failed to fire up inflation.
Subdued inflation forced the BOJ to abandon a policy targeting the pace of money printing in 2016 and shift to yield curve control, which aims to guide short-term interest rates at minus 0.1 percent and long-term rates around zero percent.
(Additional reporting by Yoshifumi Takemoto; Editing by Chang-Ran Kim and Eric Meijer)