By Leika Kihara

Japanese Prime Minister Sanae Takaichi's administration appointed Ayano Sato, seen as an advocate of loose monetary policy, as central bank board member on Tuesday, adding an important voice to debates over further rate increases.

Sato, a 57-year-old former academic, is the second board member to be appointed by Takaichi following Toichiro Asada, who voted against the Bank of Japan's decision to raise interest rates in June.

The newcomer joins a hawkish leaning nine-member board focusing on mounting inflationary pressures from the Middle East conflict and rising import costs from a weak yen.

Sato will hold a news conference at 5 p.m. (0800) GMT on Tuesday, which will be closely watched for clues on whether she could join Asada in pushing back against further rate hikes.

"With the reflationist Sato joining, any future proposal by the chair to raise interest rates has a strong chance of drawing two dissenters," said Mari Iwashita, executive rates strategist at Nomura Securities.

"Still, we won't see that big an imbalance given there would be two hawks in the board until July next year," she said.

Naoki Tamura and Hajime Takata are seen as the most hawkish board members. They made an unsuccessful proposal to raise rates in April. Both will see their term expire in July next year.

Sato replaced Junko Nakagawa, who joined the two hawks in proposing a rate hike in April.

Sato's debut policy meeting will be on July 30-31. While the BOJ is widely expected to keep rates steady at the meeting, the board will issue fresh quarterly growth and inflation forecasts that will likely offer clues on the timing of the next rate hike.

The BOJ raised interest rates to a 31-year high in June in a landmark step in its policy normalisation, signalling readiness to tighten further as it focuses on taming price pressures from the Iran-war-induced energy shock.

But there is uncertainty on the pace and timing of future rate hikes with Takaichi's administration signalling caution over any steps that could increase the cost of funding its flagship investment plans.