Investors are looking for fresh ideas

The news - only confirmed after trading stopped in Tokyo - was enough to buoy the market mood, as investors were worried that a new BoJ governor could be hard to find.

But there are concerns that Mr Fukui may not have enough inspiration to grapple with the many problems of Japan's recession-mired economy.

The post is one of extreme importance in Japan's current economic predicament.

Japan's banking system, crippled by mountains of bad debt, is seen as one of the main obstacles to any recovery.

High hopes

Shares, government bonds and the yen were all in positive territory by the end of the Japanese trading day.

CHANGE AT THE BANK OF JAPAN Toshihiko Fukui Worked for 40 years at the BoJ, rising to deputy governor Stepped down in 1998 after a BoJ subordinate was arrested for corruption Now head of the Fujitsu Research Institute Click here to read more about the Bank of Japan

Mr Fukui's key perceived strength is his ability to form a close working relationship with government - often a problem area, when the interests of economic policy makers and politicians diverge.

He is also to be backed by two more radically-minded deputies, Toshiro Muto and Kazumasa Iwata.

Mr Iwata is believed to have radically different ideas from the current BoJ leadership, and is expected to call for a drastic change in policy such as pursuing an inflation target.

Analysts are undecided, however, whether combining sharply differing views within the new BoJ management team will be healthy or a recipe for policy muddle.

Wanted: Innovation

New ideas are crucial.

Since the BoJ has little room to manoeuvre on interest rates - which are effectively at zero - it has to seek more inventive ways of massaging the financial system.

Doing something to mend banks is seen as vital, since reviving bank lending is the main way to pump cash back into the economy, and hence reverse the debilitating cycle of deflation.

Under an inflation targeting programme, the Bank would set a target for inflation over a fixed period, and then seek to hit it by buying assets such as shares, bonds or property.

This policy has been long rejected under current BoJ governor Masaru Hayami, who argued it was too risky.

While markets seemed modestly cheered by the news, more considered reactions were worryingly mixed.

"Fukui is the big business candidate, a trusted hand that will continue to steer Japan on a deflationary course," said Jesper Koll of Merrill Lynch.

"We'll continue to have an accommodative BoJ, not a proactive BoJ."

Others were more positive, but not exactly glowing.

"It's not going to be a regime shift but certainly he will be better at working with the government, he'll be better at communicating policies to the market," said Matthew Poggi of Lehman Brothers.

"We're generally positive that over some time he will be seen as a good governor."