(Bloomberg) -- Japan's ruling party members see the possibility of division within the party if Prime Minister Fumio Kishida's choice for the new Bank of Japan chief is someone who is unlikely to follow the current path of monetary easing.
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With the nomination of Haruhiko Kuroda's successor likely to come next week, several Liberal Democratic Party members said there will be opposition if Kishida chooses former BOJ Deputy Governor Hirohide Yamaguchi, speaking on condition of anonymity.
The yen fluctuated against the dollar following the report, as did the benchmark index of stocks in Japan.
Yamaguchi's name has recently come up third in economist polls of likely BOJ governor candidates, after he was mentioned as a possible pick in local media.
If chosen, market participants expect the decision to cause major market volatility, and send the signal the government is seeking a clear policy shift toward normalization.
The former deputy served under ex-governor Masaaki Shirakawa, who was heavily criticized by lawmakers for appearing reluctant to ease policy. That political frustration led to support for Shinzo Abe's critical stance against the bank, eventually enabling him to take the helm and install current Governor Kuroda and his aggressive stimulus program.
The view among the party members won't necessarily rule out the chance of Yamaguchi being tapped.
But it suggests Kishida may have to sacrifice political support within the party to go ahead with that decision. Opposition may be particularly clear from the ruling party's biggest faction, which was led by Abe until his murder in July.
These views highlight how choosing the first new BOJ governor in a decade won't be purely about Kishida's personal intentions for monetary policy, the economy or financial markets.
The premier will likely consider how his choice will be perceived by his fellow party members, given his approval ratings are hovering around record lows, weakening his political capital within the LDP.
Read More: Kishida Indicates Not Wanting to Surprise Market With BOJ Choice
Kishida said Wednesday that he will carefully consider the potential impact of his choice on financial markets. Yamaguchi is seen as the most hawkish among the three leading candidates, which include current Deputy Governor Masayoshi Amamiya and his predecessor Hiroshi Nakaso.
--With assistance from Yuki Hagiwara.
(Updates with details of market moves)
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