Japan's government is likely to appoint academic Kazuo Ueda, a former member of the Bank of Japan's policy board, as the bank's next governor, two government officials told Reuters.
The choice is being seen by markets as driving the bank in a more hawkish direction and boosting the yen.
Ueda, an academic at Kyoritsu Women's University, is considered an expert on monetary policy and played a key role in battling the initial phase of Japan's deflation with the introduction of quantitative easing (QE) and forward guidance for financial markets.
But most analysts said the appointment of the 71-year-old was a huge surprise as he was not even considered a dark horse candidate.
They said it was hard to tell immediately what that meant for changes, if any, in the bank's monetary policy direction.
Investors have repeatedly tried to push up Japanese government bond yields in recent months on expectations the Bank of Japan will start to phase out its massive stimulus programme when a new governor takes over after Haruhiko Kuroda's second term ends in April.
While other central banks around the world have been scrambling to cool stubbornly high inflation by ramping up interest rates, the Bank of Japan has been in no rush to change its super-loose policy stance.
The government will also nominate Ryozo Himino, former head of Japan's banking watchdog, and BOJ executive Shinichi Uchida as deputy governors, the two officials with knowledge of the matter said.
The Nikkei reported earlier that Ueda, Himino and Uchida will make up the new Bank of Japan leadership.
"Ueda is well-versed in interest rates. And he also has an experience of the communication struggle over the BOJ's zero-interest rate policy when he was a board member," said Shotaro Kugo, an economist at Daiwa Institute of Research.
"Being a theorist and practitioner at the same time would make him well positioned going forward as the Bank of Japan enters a difficult period of (policy) normalisation," he added.
Japan's government is expected to present the nominees to parliament on February 14.
In an opinion piece that ran on the Nikkei in July last year, Ueda warned the Bank of Japan against prematurely raising interest rates just because inflation briefly exceeded 2%.
But he also said the bank must consider an exit strategy from ultra-loose monetary policy, and review its extraordinary stimulus programme at some point, according to the piece.
Ueda served on the Bank of Japan's board from 1998 to 2005. He voted against raising interest rates to 0.25% from zero in August 2000, arguing that the bank could wait a while longer given limited inflation.
The Bank of Japan later reversed its decision and cut rates again.
