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YOKOHAMA, Japan (Reuters) - The Bank of Japan will consider easing monetary policy again if needed and it would most likely be through further asset purchases, a central bank policymaker said, warning an economic recovery is hardly assured given the murky overseas outlook.
Board member Takahide Kiuchi, a former economist, also said on Thursday that Japan's widening trade deficit may destabilize financial markets by diminishing the excess domestic cash that has helped keep the country's bond yields low.
"There's still uncertainty on whether Japan's economy will head for a full-fledged recovery," Kiuchi told business leaders in Yokohama, near Tokyo, pointing to overseas risks such as persistent market jitters over Europe's debt woes.
"We will strive to achieve our new target, including through taking additional easing steps boldly when necessary," said Kiuchi, who was one of two BOJ board members to vote against adopting a 2 percent inflation target last month.
Kiuchi said the key means for any future stimulus would be a further expansion of its asset-buying and lending program.
He also said the BOJ must carefully scrutinize the costs and benefits of various options being floated by markets, such as buying longer-dated government bonds or more risky assets.
The BOJ doubled its inflation target to 2 percent in January and made an open-ended pledge to buy assets from next year, under pressure from Prime Minister Shinzo Abe to take bolder efforts to beat deflation.
Kiuchi and Takehiro Sato voted against the inflation target in January, arguing that it far exceeded levels deemed sustainable in Japan, which has been mired in deflation for much of the past two decades.
In Thursday's speech, Kiuchi said he dissented due to his view that the central bank should first do its utmost to achieve its prior target of 1 percent inflation.
Editing by Edmund Klamann and John Mair