Ayano Sato, newly appointed to the Bank of Japan's policy board and the second member nominated by Prime Minister Sanae Takaichi, cautioned on Tuesday that the central bank must be alert to the inflationary effect of a softening yen. Speaking at her first public briefing, Sato highlighted recent corporate behaviour in passing higher costs through to selling prices and said that exchange rate moves could now have a larger influence on core inflation than in prior periods.
Sato, a 57-year-old former academic viewed as sympathetic to easier policy, stressed that monetary and fiscal authorities each have distinct responsibilities. "Monetary policy should focus on inflation, while fiscal policy should support households and firms affected (by higher prices)," she said.
She declined to provide a timetable or pace for any additional rate increases, but made clear that the BOJ must remain attentive to risks on both sides of its mandate - downside risks to economic growth and upside risks to inflation. "In guiding monetary policy, it’s important to determine whether recent price rises are temporary moves driven by higher costs, or sustained inflation led by demand," Sato said. "At this point, it’s hard to reach a conclusion."
On currency dynamics, Sato noted the trade-off presented by a weaker yen: it supports exporters but erodes households' real incomes by lifting import prices. She warned that rising wages combined with more active corporate price-setting mean that yen depreciation could now exert a stronger influence on inflation than in the past. As a result, she called for vigilance toward the boost a weak currency could give to underlying price pressures.
Sato framed her approach as data-dependent and resisted labels. Although she praised former BOJ Governor Haruhiko Kuroda's large-scale stimulus programme - which the incumbent governor Kazuo Ueda ended in 2024 - for helping create jobs and lift equity prices, she declined to describe herself as a reflationist. Her stated motto is to rely on incoming data rather than adhere to any single economic creed.
Her appointment follows that of Toichiro Asada, who voted against the BOJ's decision to raise interest rates in June. Sato replaces Junko Nakagawa, who had joined two board members with a more hawkish stance in proposing a rate increase in April; that proposal was not adopted at the time, although the central bank ultimately raised rates in June to a 31-year high.
Sato joins a nine-member board now described as leaning hawkish overall, tasked with confronting mounting inflationary pressures linked to higher import costs stemming from a weak yen and geopolitical-driven energy price rises related to the conflict in the Middle East. Her first policy meeting as a board member is scheduled for July 30 and 31, when the BOJ is widely expected to hold interest rates steady but will release updated quarterly growth and inflation forecasts that may provide clues about the timing of subsequent rate moves.
At her briefing, Sato said she had not received policy directives from Prime Minister Takaichi and noted that the BOJ's independence from political interference is clearly enshrined in law. She reiterated the need for coordination between monetary and fiscal policy tools to ensure price stability while cushioning households and businesses exposed to higher prices.
Context and implications
Sato's comments underscore the BOJ's balancing act as it navigates higher global energy costs and exchange rate-driven import inflation while monitoring domestic demand signals and wage growth. Her emphasis on a data-dependent stance signals that future decisions will hinge on whether price increases are judged to be transitory cost pass-throughs or the start of sustained demand-driven inflation.
Her presence on the board, following the appointment of another Takaichi nominee who dissented on the June rate increase, further shapes the composition of the BOJ at a sensitive juncture for policy normalization. Markets and policymakers will watch the upcoming quarterly forecasts for guidance on the likely timing of any further tightening.
Meeting calendar and near-term expectations
The BOJ's policy meeting on July 30 and 31 will be Sato's first as a board member. The central bank is expected to keep the policy rate unchanged at that meeting, while publishing refreshed projections that could illuminate the board's assessment of inflation momentum and the prospective pace of future rate adjustments.