Tokyo, March 14 (Bloomberg) -- The retirement this month of Bank of Japan boardmember Eiko Shinotsuka, a leading proponent of higher borrowing costs, may lead thecentral bank to adopt a more aggressive policy to stimulate the economy, analystssaid. Shinotsuka, who for much of last year proposed raising rates, even before the BOJincreased borrowing costs for the first time in 10 years in August, will step down whenher three-year term expires on March 31. She'll attend her final board meeting onMonday. Another board member, Susumu Taketomi, will retire in June. The departures give the government the opportunity to appoint two members moresympathetic to its policy. Government officials have been urging the Bank of Japan tocut interest rates, increase the amount of government bonds it buys each month oradopt an inflation target. ``Shinotsuka's departure will change the power balance on the board,'' said TakehiroSato, an economist at Morgan Stanley Dean Witter Japan. BOJ Governor Masaru Hayami has resisted buying more bonds or artificially inflatingthe economy, though he has hinted he has eased his opposition to these suggestions. Shinotsuka's seat on the nine-member board will likely be taken by Miyako Suda, aneconomics professor at Gakushuin University, Jiji Press reported, citing unidentifiedsources. Suda couldn't immediately be contacted for comment. ``Suda's position is still unclear, whether she is hawkish or dovish,'' said Sato.
Reversed Course
Shinotsuka opposed the bank's 17-month long policy of keeping interest rates close tozero, saying it hurt retirees who relied on interest from savings for income. She voted infavor when the bank raised interest rates a quarter-point in August last year. The bank has since reversed course, cutting its key interest rate 10 basis points to0.15 percent on Feb. 28. Minutes of that meeting will be released April 18. While the government ceded control over the Bank of Japan in 1998, it still retains thepower to appoint members to the board. ``New members will likely be dovish, or at least neutral,'' said Masaaki Kanno, chiefeconomist at J.P. Morgan Securities (Asia) Ltd. ``The board's power balance willapparently shift, and that will start influencing its decisions.'' Suda has lectured new central bank employees, and also was also a member of thecommittee that discussed revisions to the BOJ law in 1998 that made the central bankindependent from the Ministry of Finance. She maintained the central bank, instead of the Finance Ministry, should have theauthority to decide whether to intervene in the currency market, and also said a weakeryen would help the economy.