Koeda to Join Bank of Japan, Signaling Shift Toward Conventional Monetary Policies

The Bank of Japan is undergoing a significant shift with the appointment of Junko Koeda to its board, which indicates a move toward more conventional monetary policies. The transition marks a departure from the policies pursued under former Governor Haruhiko Kuroda, particularly the focus on ultra-low interest rates and aggressive monetary easing aimed at raising inflation to a 2% target. Koeda, known for her fiscal and monetary conservatism and quantitative analysis abilities, is expected to complement the vision of current Governor Kazuo Ueda for a more traditional central banking approach. Her appointment comes amid a broader reshuffle that reduces the influence of ‘reflationists’ on the board. As Board Member Seiji Adachi exits and Toyoaki Nakamura is expected to depart in June, the Bank’s strategy increasingly favors steady interest rate hikes. Analysts suggest that Koeda’s expertise could facilitate a deeper discussion on managing the Bank's large balance sheet and the pace of shifting short-term rates. The reshuffle indicates the Bank's readiness to align more closely with global standards in central banking by addressing issues such as asset shrinkage, echoing the challenges faced by international peers.