By Makiko Yamazaki, Yoshifumi Takemoto and Leika Kihara
TOKYO (Reuters) -Japan’s government on Tuesday nominated Junko Koeda, an academic who had warned of the cost of prolonged monetary easing, to join the Bank of Japan board in March, a choice analysts say will keep the central bank on course to raise interest rates.
If approved by parliament, it will be the first time two women will take seats at the male-dominated, nine-member board. There has been only one woman in the board up until now; the current member, Junko Nakagawa, joined in 2021.
The nomination comes at a critical time for the BOJ, which last week raised interest rates to their highest since the 2008 global financial crisis on the view Japan was on the cusp of sustainably achieving its 2% inflation target.
An academic specialising in macroeconomics and finance at Japan’s Waseda University, Koeda has frequently participated in BOJ-hosted panels to offer insights on the effects of monetary policy. She was a member of a BOJ workshop in December 2023 that debated the pros and cons of past unconventional easing steps.
A month after the BOJ’s decision in March 2024 to end negative interest rates, Koeda endorsed the move in a newspaper commentary, saying that it was in the right direction and called for the need to shrink the BOJ’s massive balance sheet.
In a separate commentary written in 2022, she had warned of the cost of prolonged, ultra-low interest rates.
“Her appointment probably meshes with Governor Ueda’s hope to deepen the bank’s theoretical understanding of its monetary policy,” said Mari Iwashita, a veteran BOJ watcher who is currently executive economist at Daiwa Securities.
“It will likely help deepen the BOJ’s internal debate on where Japan’s neutral rate lies,” Iwashita said, referring to financial markets’ focus on how much higher the bank could push borrowing costs without dragging on economic growth.
Koeda would replace former economist Seiji Adachi, whose five-year term ends on March 25. Her first BOJ policy meeting will be on April 31-May 1.
“There’s a strong chance she will support the BOJ’s current policy direction” of gradual rate hikes and quantitative tightening, said Yusuke Matsuo, senior market economist at Mizuho Securities.
“The direct impact on monetary policy decisions will likely be limited” as she would be replacing Adachi, who has been considered as taking a neutral approach on monetary policy and voted for the BOJ’s decisions, Matsuo said.
Prime Minister Shigeru Ishiba’s first pick of a new BOJ board member has been closely watched by markets as offering clues on the administration’s stance on monetary policy.
The nomination must be approved by both houses of parliament. Ishiba’s minority government will need endorsement from opposition parties to get the nomination approved.
Koeda previously held positions such as a chief economist at Japan’s finance ministry and a staff economist at the International Monetary Fund. She has a Ph.D. degree in economics from UCLA.
Takahide Kiuchi, a former BOJ board member who is currently an economist at Nomura Research Institute, described Koeda as a scholar with a proven track record in quantitative analysis of the BOJ’s monetary policy.
“She pointed out the side effects of the BOJ’s monetary easing in the past, giving an impression that she has a neutral stance on policies,” Kiuchi said.
(Reporting by Makiko Yamazaki, Yoshifumi Takemoto, Leika Kihara, Kentaro Sugiyama and Takaya Yamaguchi; Editing by Chang-Ran Kim, Kim Coghill and Shri Navaratnam)
