FXstreet.com (Barcelona) - The time to appoint the governor at the Bank of Japan is fast approaching, and according to a article from the Wall Street Journal, Japanese Prime Minister Shinzo Abe and his finance minister, Taro Aso, have picked two candidates as the main front runners.

The two candidates enjoying the most support are Toshiro Muto and Kazumasa Iwata. A third candidate vaguely rumoured to take the post is Haruhiko Kuroda, the president of the Asian Development Bank, although he has recently refuted participating in any speculation to become the next governor, saying he is still in the middle of his term.

Who will be the next BoJ chief remains uncertain, yet what market players seem to agree on is that the Japanese Yen is poised for some wild swings depending on who takes charge of new aggressive monetary policies.

As the WSJ notes: "Mr. Abe needs to submit his nomination to the parliament and gain its approval before current Gov. Masaaki Shirakawa steps down together with his two deputies on March 19 to avoid a vacancy. Given the procedures in parliament, the government would like to start informal negotiations with the opposition in the next day or two, the officials said."

The WSJ adds: "I'm convinced Mr. Aso's preferred candidate is Mr. Muto," said a senior government official who works closely with the prime minister. "I'm also convinced that Mr. Abe and Mr. Aso's preferred candidates are different," the official added.

Mr. Iwata, with an academic background, is summarized by Nomura analysts, as being proactive on inflation targets:

"When he was BOJ deputy governor, he expressed his opinion that the BOJ should set a maximum of 2% as a price stability target (at the time, 0% was the limit to end quantitative easing). He also said that the goal should be lifted to 1–2% or 2% when prospects of 1% inflation were in view."

Furthermore, foreign policy is also important to Mr. Iwata. Nomura notes:

"He thinks the MOF and BOJ should work together to set up a fund of over ¥50trn to rein in sharp forex fluctuations. He has also proposed a establishing a public-private fund investing in foreign bonds. Even under current legislation the BOJ can purchase foreign bonds as part of its regular operations. 90-100 would be return to equilibrium, he said yesterday, a bearish comment for the Yen which failed to get follow through.

As per Mr. Muto, made BOJ deputy governor under the Koizumi-led LDP government, Nomura describes his policies as also proactive on government involvement in inflation targeting:

"The government and BOJ should share inflation targets. Hiking the target to 2% once inflation hits a target of 1% is realistic, but there is an issue of whether suddenly hiking the target to 2% is the right thing to do" he has been quoted saying.

On foreign policies, Mr. Muto has been slightly negative on foreign bond purchases. As Nomura explains citing the candidate:

"Purchasing foreign bonds for the purpose of intervention is acceptable under circumstances that warrant intervention. Foreign bond purchases are possible if the Minister of Finance decides so. Forex policy needs the understanding of the international community, and sudden substantial intervention would probably come in for major international criticism."

According to the WSJ, "officials close to the prime minister say it may be difficult to win opposition backing for Mr. Muto, as the largest opposition party, the Democratic Party of Japan, voted down Mr. Muto five years ago when he was also nominated for the top BOJ job, on the grounds that he was a former finance ministry official. Many other parties share that view."

As a reminder, the ruling party from Mr. Abe has to gain the support from other opposition parties since it doesn't enjoy majority in the upper house. The nominees should be approved by both chambers of the parliament.