Junko Koeda Nominated to Join Bank of Japan Board

By Makiko Yamazaki, Yoshifumi Takemoto and Leika Kihara

TOKYO (Reuters) – Japan’s government nominated Junko Koeda, an academic warning about the cost of prolonged monetary easing, for the Bank of Japan board this March. Analysts believe her nomination will support the central bank’s interest rate hike strategy.

If approved by parliament, this nomination marks a milestone with two women on the nine-member board. Until now, only one woman served, Junko Nakagawa, who joined in 2021.

This decision comes as the BOJ raised interest rates to their highest since the 2008 global financial crisis, anticipating Japan may meet its 2% inflation target sustainably.

Koeda, specializing in macroeconomics and finance at Waseda University, has actively participated in BOJ discussions regarding monetary policy and was part of a workshop examining past easing measures in December 2023.

Following the BOJ’s decision in March 2024 to discontinue negative interest rates, she endorsed the move, advocating for reducing the BOJ’s large balance sheet. In a 2022 commentary, she cautioned against the implications of maintaining ultra-low interest rates indefinitely.

Mari Iwashita, an economist at Daiwa Securities, suggested that Koeda’s appointment aligns with Governor Ueda’s interest in enhancing the theoretical framework of the bank’s monetary policy, aiding discussions on Japan’s neutral rate and borrowing costs.

Koeda will replace Seiji Adachi, whose five-year term concludes on March 25, with her first BOJ policy meeting set for April 31-May 1.

Yusuke Matsuo, a senior market economist at Mizuho Securities, noted that Koeda is likely to advocate for gradual rate increases and quantitative tightening.

Although the impact on monetary policies might be minor since she replaces Adachi, understood to be neutral, Prime Minister Shigeru Ishiba’s selection could reveal the administration’s approach to monetary policy.

Approval from both parliament houses is required, and the Ishiba administration, a minority government, needs support from opposition parties for Koeda’s nomination.

Koeda has previously served as the chief economist at Japan’s finance ministry and worked at the International Monetary Fund, holding a Ph.D. in economics from UCLA.

Takahide Kiuchi, a former BOJ board member, characterized Koeda as a capable scholar with experience in quantitative analysis of the BOJ’s monetary policies, emphasizing her record of addressing the side effects of monetary easing and her perceived neutrality on policies.