Haruhiko Kuroda, president of the Asian Development Bank, emerged at the weekend as the frontrunner to win the government's nomination to become the next governor of the Bank of Japan.

Prime minister Shinzo Abe is expected to make a final decision on the nomination in the coming days, having consulted with opposition parties. The government's selection, which will have a strong bearing on the direction of monetary policy in the world's third-largest economy for the next five years, must be approved by both houses of Japan's parliament. Mr Abe's ruling bloc lacks a majority in the upper house.

Speculation over the appointment has mounted since the current governor, Masaaki Shirakawa, said he would step down in mid-March, three weeks ahead of schedule.

On Saturday, the Asahi newspaper reported that Mr Kuroda, a former top financial diplomat, had edged ahead of his two closest rivals for the nomination, former deputy governors Toshiro Muto and Kazumasa Iwata, who both left the BoJ to join Tokyo-based research institutions in 2008. The Kyodo and Jiji news agencies also cited sources as saying Mr Kuroda had emerged as the frontrunner.

All three candidates have made public statements suggesting that they share the government's commitment to overcoming deflation through more aggressive monetary stimulus.

However, the prospects for Mr Iwata may have dimmed following the international row over the steep fall in the yen triggered by Mr Abe's resounding victory in December's elections. Last week Taro Aso, finance minister, said that Japan had no intention of setting up a fund to buy foreign bonds to cap gains in the currency -- a policy pushed by Mr Iwata.

Given the show of support by the Group of 20 nations this month for market-determined exchange rates, that option is "largely off the table" for now, said Kyohei Morita, economist at Barclays in Tokyo.

Mr Muto is still a strong contender, according to people familiar with the situation, and is thought to be the preferred candidate of Japan's powerful finance ministry, where he spent 37 years before joining the BoJ in 2003.

Yet Mr Kuroda may be considered a better all-round fit with the various requirements set out by Mr Abe and Mr Aso in recent weeks. In particular, Mr Kuroda is a fluent English speaker, and after eight years at the helm of the Manila-based ADB, may be seen as a more effective ambassador for policies that have already caused friction among Japan's trading partners.

Under persistent pressure from Mr Abe, the BoJ in January doubled its inflation target to 2 per cent and agreed to open-ended purchases of assets from 2014. Such acts have helped to send the yen down sharply against the US dollar, as investors bet that Japan's monetary settings will stay looser for longer.