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Central bank governor of the year 2005: Japan

Toshihiko Fukui has overseen a successful policy U-turn in Japan's fight against deflation. Despite intense pressure, he has kept interest rates low until sustained inflation returns.

Toshihiko Fukui: Japan

IN MANY WAYS the governor of the Bank of Japan is an unlikely hero. Appointed in March 2003, Toshihiko Fukui was not the radical, reforming hire from outside the staid government institution that some advocated to put Japan's finances back into shape. Instead he was an internal appointment who had served the bank faithfully through some of Japan's darkest economic days.

These were hardly auspicious portents but Fukui's leadership has proved to be sound so far. Japan's economic recovery continues to bloom, albeit tentatively. Unemployment has fallen, exports have grown strongly, bank reform has progressed, although too slowly and, most important, the deflation that has ravaged Japan for so long looks as if it might finally have been eradicated.

Fukui is so confident about deflation that in August he announced to Japan's parliament that he expected it to disappear, perhaps as early as the end of this year. Just how much credit Fukui can take for Japan's economic renaissance is difficult to tell, though Adam Posen, senior fellow at the Institute of International Economics in Washington, is in no doubt.

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