HIROSHIMA, July 25 (Reuters) - Bank of Japan Deputy Governor Hirohide Yamaguchi said on Wednesday the central bank will not hesitate to ease monetary policy further if risks to Japan's economy heighten sharply resulting from some kind of shock.
Yamaguchi said the effect of the BOJ's monetary easing will gradually broaden as the central bank steadily purchases assets to meet the existing target under its asset buying programme.
"But of course if some kind of shock leads to the economy undershooting our forecast or heightens risks to the outlook sharply, we won't hesitate to ease monetary policy further," Yamaguchi said in a speech to business leaders in Hiroshima, western Japan.
The BOJ said it wanted to see 1 percent inflation and eased monetary policy via an increase in asset purchases in February, and followed up with another easing in April to show its resolve to beat deflation, which has stifled the economy for most of the past two decades.
The central bank has held off on further easing since then despite slowing global growth that has driven other major central banks to loosen policy, convinced that spending for rebuilding from last year's earthquake and tsunami will keep Japan's economy on track for a moderate recovery.
Yamaguchi, one of the BOJ's two deputy governors, is a key figure to watch for signals on the future direction of monetary policy. Markets count him among those board members who are more eager to ease preemptively when needed to support the economy. (Reporting by Leika Kihara; Editing by Michael Watson)