The monetary authority of the world's second-biggest economy faces a looming succession crisis as parliamentary meltdown threatens to create a “vacuum scenario” at the Bank of Japan (BoJ).

MPs from the ruling Liberal Democratic Party (LDP) have told The Times that because they no longer control both houses of the Diet, there is now a “credible risk” that at the end of Toshihiko Fukui's five-year term of office on March 19 his post might be left temporarily vacant for the first time since the Second World War.

The Government's attempt to avert that possibility could hand the job to Haruhiko Kuroda, the president of the Asian Development Bank and a candidate less likely to provoke political deadlock.

But Takehiro Sato, Morgan Stanley's chief Japan economist, said that the chances of an uncontested succession were now slim, adding that “the vacuum scenario is starting to look more realistic”.

Any BoJ governorship vacancy, though almost certainly short-lived, would arise as some analysts argue that Japan's economy is teetering on the brink of recession and in dire need of firmer fiscal stewardship.

Having spent most of the years since 2003 attempting to haul Japan out of deflation and put an end to the controversial zero interest rate policy, it was only last July that Mr Fukui was able to “normalise” monetary policy by raising rates. His successor, economists say, may well face pressure to lower them again if the bad news from the United States worsens.

Whoever does become governor, most economists do not predict a dramatic change in the present BoJ view that rates are low and need to normalise. Richard Jerram, an economist at Macquarie, said in a note to clients that Mr Fukui's successor was “more likely to bury their head in the sand, do nothing and hope for the best”.

The impending parliamentary vote to elect a new central bank governor comes as Yasuo Fukuda, the Prime Minister, admitted yesterday that the slowing economy had left the LDP confronting the biggest popularity crisis since its creation in 1955. The appointment of a governor is widely tipped to be seized on as an opportunity for the opposition Democratic Party (DPJ) to press home its parliamentary advantage.

The election of a new governor — and his two deputies — requires endorsement by both houses of parliament, but since a defeat at the polls last year, the Government no longer controls the upper house.

Toshiro Muto, the present deputy governor, has long been the front-runner among candidates expected to succeed Mr Fukui. He is clearly the favoured choice of the LDP, but reports from within the DPJ suggest that a growing number of MPs are preparing to block his appointment.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive