BoJ needs deflation fighter: Koizumi

Speculation has been mounting on possible candidates to replace Hayami, who will stand down on 19 March. Government ministers and many economists have said the central bank should do more to halt deflation but Hayami has resisted radical steps such as setting an inflation target.

"It should be a person with opinions who will work actively to get rid of deflation," Koizumi told reporters at his official residence. "But I'm not yet in a position to say who it will be."

The premier has been under mounting pressure to tackle falling prices in the world's second largest economy.

"Economists and politicians are frustrated with deflation," said JP Morgan chief economist Masaaki Kanno.

Consumer prices fell for the 38th consecutive month in October in year-on-year terms. Deflation erodes consumer demand and corporate profits while increasing debt in real terms.

A key question facing the candidates would likely be whether they intend to introduce an inflation target, Kanno said. Hayami has rejected the move, saying the BoJ could not arguing that artificially lifting prices sharply would hurt banks, government financing and corporate profits.