In surprise move, Japan's government taps two reflationists for BOJ board

 Japan's government on Wednesday nominated two academics seen by markets as strong advocates of economic stimulus to join the central bank's board, in moves seen reflecting the Takaichi administration's monetary policy preferences. The appointments, shown in a document presented to parliament, briefly sent the yen down past 156 per dollar and boosted the Tokyo stock market, as investors trimmed expectations about the speed of interest rate hikes. Make sense of the latest ESG trends affecting companies and governments with the Reuters Sustainable Switch newsletter. Sign up here. Advertisement · Scroll to continue The nominations follow similar postings by Prime Minister Sanae Takaichi to several roles of people seen as economic "reflationists" who advocate loose monetary and fiscal settings to prop up growth, even if it means increasing inflation and debt. "The expectation had been that the Takaichi administration would choose candidates mindful of the currency and bond markets, but both nominees turned out to be staunch reflationists," said Eiji Douke, chief fixed income strategist of SBI Securities. "That drove home the impression that Prime Minister Takaichi is indeed a reflationist, a development that is, if anything, a surprise," he said. Advertisement · Scroll to continue Toichiro Asada, professor emeritus at Chuo University, is known for his support of aggressive fiscal spending. He would replace economist Asahi Noguchi, whose term ends on March 31. Once known as a dove, Noguchi, a former economics professor at Senshu University, voted for the Bank of Japan's past two rate hikes. Ayano Sato, professor at Aoyama Gakuin University, would replace Junko Nakagawa, whose term expires at the end of June. Nakagawa was formerly chair of Nomura Asset Management. REVIVAL OF ABE LOYALISTS Since her rise to office last year, Takaichi's calls for ramped-up spending and looser fiscal policy have rattled financial markets, as investors fret about a weakening yen and ballooning government deficits. In Sato's speech to a group of reflationist-minded ruling party lawmakers in February 2023, Sato said that a weaker yen "would certainly bring benefits to the Japanese economy", and that Japan should continue along the same lines as stimulus policies of former Prime Minister Shinzo Abe, known as Abenomics.