Japan government to submit BOJ nominees next week, list includes reflationists

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Government to submit nominees to fill 2 BOJ board seats

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Choice will offer clues on Takaichi's monetary policy stance

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List includes reflationists but uncertainty on final choice

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Some analysts doubt Takaichi will choose reflationists

By Takaya Yamaguchi and Leika Kihara

TOKYO, Feb 20 (Reuters) - Japan's government will likely present nominees next week to fill two seats opening ?up at the central bank board, a choice that will offer ?clues on the extent to which Prime Minister Sanae Takaichi could tolerate further interest rate hikes.

The list of candidates includes some reflationists, though it is uncertain ?who Takaichi will eventually choose, said two sources with knowledge of the deliberations.

"While the person doesn't need to ?be an advocate of loose monetary policy, it's important it isn't someone who ?would shun the views of reflationists," ?another source said. Both sources spoke on condition of anonymity due to the sensitivity of the matter.

The government will submit its nominees for both ?seats to parliament as early as February 25, which need ?approval by both the lower and upper chambers.

"The personnel choices will be a big factor in scrutinising the administration's stance on monetary policy," said Tsuyoshi Ueno, an economist at NLI Research ?Institute.

The dovish premier has authority to pick successors to ?Asahi Noguchi, seen ?as the board's last remaining reflationist whose term ends in March, and Junko Nakagawa, who comes from the financial industry and will retire in June.

If history is any guide, Noguchi's successor is likely ?to come from academia, while Nakagawa is expected to be succeeded by a female candidate from the ?financial sector, a third source said.

Takaichi has already appointed several reflationists to key government panels including former Bank of Japan Governor Masazumi Wakatabe, heightening the chance she could do so for the openings in the BOJ's nine-member board.

The choice may affect the BOJ's discussions on the pace and timing of future rate hikes by shifting the composition of ?the nine-member board, ?which has increasingly shifted in favour of steady rate increases.

It could also offer clues ?on what kind of candidates Takaichi may choose to fill two more board seats opening up next year when hawkish ?members Hajime Takata and Naoki Tamura retire.

If Takaichi stays in power long enough, she would have authority to choose the successors to BOJ Governor Kazuo Ueda and his two deputies when their five-year terms end in 2028.

Some analysts doubt Takaichi will fill the BOJ board openings this year with vocal advocates of low interest rates, as doing so could trigger sharp yen falls by heightening market expectations of delays in further rate hikes.

Etsuro Honda, an economic adviser to Takaichi, told Reuters the government ?does not necessarily need to pick reflationists to fill the board openings as the economy has exited deflation.

"Given the risk of market backlash, the administration isn't clinging much to reflationist policies. It may not persist in filling the ?BOJ openings with reflationists," said Saisuke Sakai, senior economist ?at Mizuho Research & Technologies.

(Reporting by Takaya Yamaguchi and Leika Kihara, additional reporting by ?Tokyo policy team Editing by Shri Navaratnam)