By Leika Kihara
HAKODATE, Japan (Reuters) - Bank of Japan board member Goushi Kataoka advocated a pre-emptive further easing in monetary policy, warning of risks to the inflation outlook and the pain spreading through the economy from the bitter U.S.-China trade war.
A vocal supporter of aggressive easing, Kataoka warned that Japan's economic growth will fall short of its potential in coming years as the global slowdown hurts exports.
Inflation likely won't accelerate toward the BOJ's 2% target, partly because the yen could strengthen and weigh on import costs as other central banks ramp up stimulus, he said.
"When there is a distance between our price target and actual inflation, it's important to respond pre-emptively instead of waiting until we confirm that the price trend has changed," Kataoka said in a speech to business leaders in Hakodate, northern Japan.
The comments run counter to Governor Haruhiko Kuroda's view that despite heightening risks, Japan's economy is sustaining momentum to achieve the central bank's price goal.
But Kataoka's calls for pre-emptive action underscores a growing sense of alarm within the BOJ over the damage the trade war and slowing global demand are inflicting on the world's third-largest economy.
Over half of economists polled by Reuters last month said the chances of further BOJ easing have increased, after the central bank committed in July to expand stimulus if risks threatened to undermine the economy's recovery.
Under a policy dubbed yield curve control, the BOJ guides short-term interest rates at -0.1% and the 10-year government bond yield around 0%.
Kataoka has been among two in the nine-member board who have recently dissented to the BOJ's decision to keep the rate targets steady. He called for deepening negative interest rates at a rate review in July but did not put the proposal to a vote.
In a footnote of the text of his speech released on Wednesday, Kataoka said cutting the short-term rate target would help change the shape of the yield curve to a more accommodative one. He did not elaborate on how this could happen.
"At present, there is a gap between our inflation target and actual price moves. As such, it's necessary to strengthen monetary easing," Kataoka said.
The board is currently split between reflationist-minded members like Kataoka, who sees room to ramp up stimulus, and those who are more worried about the rising cost of prolonged easing such as the strain it inflicts on financial institutions.