UPDATE 1-Bank of Japan's ETF buying came under scrutiny at Oct rate review - summary

* BOJ must make its ETF buying sustainable, says one member

* Another opinion said crisis-mode policies could delay reforms

* Some said BOJ must be ready to ease more - Oct mtg summary

* BOJ kept monetary policy steady in October

* BOJ’s ETF buying criticised as distorting market pricing (Adds context on BOJ’s board debate at Oct meeting)

TOKYO, Nov 9 (Reuters) - The Bank of Japan needs to ensure its purchases of exchange-traded funds (ETF) are sustainable, one of its board members was quoted as saying at an October rate review, a sign of a growing concern over the rising cost of prolonged monetary easing.

Others, however, said the BOJ must be ready to ramp up stimulus to cushion the economic blow from the coronavirus pandemic, according to a summary of opinions of the October meeting released on Monday.

“The BOJ should exercise utmost vigilance against the possibility of a sudden change in financial markets and make policy responses flexibly when necessary,” one of them said.

The debate underscores the BOJ’s dilemma as the pandemic forces it to maintain a massive stimulus programme, even as years of heavy asset buying draws criticism of distorting market pricing and crushing commercial banks’ margins.

“It is necessary to continue with active purchases of ETFs and real estate investment trusts (J-REITs) for the time being,” the summary quoted a board member as saying.

“However, given monetary easing is expected to be prolonged, the BOJ should further look for ways to enhance sustainability of the measure,” the member said.

While the BOJ may need to continue supporting corporate funding, prolonging crisis-mode policies could delay structural reforms needed to achieve sustainable growth, another opinion in the summary showed.

The BOJ kept monetary settings unchanged last month including its yield targets, asset purchases and a package of measures to ease funding strains of companies hit by COVID-19.

BOJ Governor Haruhiko Kuroda has said the central bank has no plans to tweak its purchases of ETFs or unload its holdings, fending off criticism its massive buying was draining liquidity and distorting markets. (Reporting by Leika Kihara Editing by Chang-Ran Kim and Sam Holmes)