* Little room to shock markets with scale as in April * BOJ has departed from incremental approach-Sato * Repeats inflation target should be flexible one * Sato is among dissenters to BOJ's rosy projections By Leika Kihara HAKODATE, Japan, Dec 4 (Reuters) - Bank of Japan board member Takehiro Sato said he saw no need to expand monetary stimulus pre-emptively to counter the pain to the economy from next year's sales tax hike, seeking to dispel speculation of a near-term expansion of its ultra-easy policy. Even if the BOJ had tools remaining to expand stimulus, doing so could be counter-productive after having deployed all possible steps in a single blow in April, said Sato, who is among those in the board who are more pessimistic about prospects for achieving the central bank's inflation target. "The BOJ has broken away from the incremental approach (on monetary policy)," Sato told business leaders in Hakodate, northern Japan, on Wednesday. "This is the time to carefully monitor the policy effects, taking into account future economic and price conditions." Prime Minister Shinzo Abe is readying a $182 billion package this week in his latest bid to pull the economy out of deflation and bolster it ahead of the tax hike next April. The BOJ stunned financial markets early this year by pledging to double base money via aggressive asset purchases to achieve 2 percent inflation in roughly two years. Expectations that the BOJ will maintain its ultra-loose policy longer than other major central banks, and may even expand it again next year, have bolstered Tokyo share prices and pushed the yen down to a six-month low against the dollar. Sato said the BOJ ought to be ready to act again to remove any barriers that may emerge in meeting its price target. But he added that it would be hard to offer stimulus that can shock markets as much as, or even exceed, the April policy action. "I think tools for additional action are limited. But that does not mean the BOJ is ruling out any options," he told a news conference after the meeting with business leaders. While the BOJ sees no need for immediate action, its bureaucrats are pondering options in case pressure for further stimulus heightens next year, when the economy takes a hit from the sales tax hike and prices lose support from the weak yen that is now pushing up import costs. Abe said on Wednesday that he believed BOJ Governor Haruhiko Kuroda would make the right decision, when asked about the possibility of additional monetary stimulus by an opposition lawmaker in parliament. "I put great trust in (Kuroda), who has said he would not hesitate to take steps if risks emerged," Abe said. Sato said the amount of government bonds the BOJ buys under the April framework is near the limit of what it can take up realistically, suggesting that he saw little room to top up purchases further even if it were to ease again. THRESHOLD FOR ACTION HIGH Sato and fellow board member Takahide Kiuchi have publicly doubted that 2 percent inflation can be met in two years. Many private-sector analysts also see the BOJ's timeframe as too ambitious for a country mired in deflation for 15 years. The former private-sector economist was among the three board members who dissented to the BOJ's rosy projections in October, calling for the price target to be watered down. Sato repeated his view that the BOJ's target should be considered a flexible one with certain allowance for deviations, given it was difficult to keep inflation rigidly at 2 percent due to uncertainty over how the effect of monetary policy appears on the economy. He also voiced scepticism on whether consumer inflation, now nearing 1 percent, can sharply exceed that level because companies may increase wages only temporarily and there was no guarantee the BOJ's massive stimulus will heighten public expectations that prices will keep rising. "There's high uncertainty on whether short-term price rises will affect medium- to long-term inflation expectations," he said. Sato stuck to the BOJ's baseline view that Japan's economy is recovering moderately, adding that he did not expect next year's sales tax hike to severely hurt growth. He stressed the BOJ should not expand stimulus unless Japan is hit by a severe shock that derails progress in accelerating inflation to 2 percent. "My understanding is that downside risks (that may trigger action) ... do not concern such trivial matters as a small divergence from our economic and price forecasts," Sato said.