Prime Minister Shinzo Abe is expected to replace Mr. Shirakawa, who has long preached caution on monetary policy, with a successor who is more open to printing money, stoking inflation and bringing an end to the falling prices that have weighed on Japan.

During his five-year term, Mr. Shirakawa resisted calls from successive governments to be more aggressive, warning that loose money would only lead to unchecked government spending and runaway inflation. Mr. Shirakawa also argued that the government, not the Bank of Japan, needed to do more to encourage economic growth through structural reforms and other growth policies.

Since late last year, Mr. Abe has taken the bank to task, singling out its tepid monetary policies as the root of Japan’s economic woes. He successfully campaigned on a bolder monetary agenda ahead of nationwide elections in December, arguing that the central bank needed to set an inflation target of 2 to 3 percent. The strategy resulted in a decisive victory for his Liberal Democratic Party.

Markets cheered Mr. Abe’s monetary drive. The Nikkei 225-share index has surged almost 30 percent since mid-November, and the yen has weakened by 15 percent, an advantage for Japanese exporters.

Mr. Shirakawa has found it increasingly difficult to hold his ground. In January, the bank agreed to issue a rare joint statement with the government that laid out a target for 2 percent inflation. It also agreed to pursue unlimited monetary easing through an asset purchase program until that target was met. Japan has been enduring deflation, or falling prices, since the late 1990s.

But some economists have said that Mr. Shirakawa’s policies remained too timid and that unless the Bank of Japan were even more aggressive, 2 percent inflation would prove to be an elusive target. The bank needed to expand its asset purchase program, now at about 101 trillion yen, or about $1.01 trillion, by a much bigger amount, the economists have said, and needed to step up its purchases of a wider range of assets including longer-term government bonds.

“After three five-year terms of dyed-in-the-wool conservatives, the Bank of Japan is finally likely to have a governor who is prepared to use the monetary armory at his disposal,” Nicholas Smith, Japan strategist at CLSA Asia-Pacific Markets, said in a note.

Even using tougher language than the soft-spoken Mr. Shirakawa would help, Mr. Smith said. “The more you do with threatening rhetoric, the less you have to do with real money,” he said.

Speaking to reporters Tuesday, Mr. Shirakawa explained that he had offered to step down early to time his departure from the bank with those of his two deputies, whose terms end March 19.

“I told the prime minister that I will resign on March 19 so that a structure with a new governor and two deputy governors can start simultaneously,” Mr. Shirakawa said after a meeting of the government’s top economic council. He said that Mr. Abe, who led the council meeting, had “listened carefully,” but it was unclear late Tuesday whether the prime minister would agree to an early departure.

Names circulated in the Japanese news media as possible candidates to succeed Mr. Shirakawa include the former economy minister Heizo Takenaka; the former Bank of Japan deputy governors Kazumasa Iwata and Toshiro Muto; the Asian Development Bank president, Haruhiko Kuroda; and the University of Tokyo economist Takatoshi Ito.

Article source: http://www.nytimes.com/2013/02/06/business/global/japanese-central-bank-chief-to-step-down-early.html?partner=rss&emc=rss