HIROSHIMA, Japan (Reuters) – The Bank of Japan does not need to ramp up monetary stimulus for now as a moderate recovery is expected later in the year but should be ready to loosen policy further if external pressure on the economy intensifies, board member Yukitoshi Funo said on Wednesday.

Funo said Japan’s economy was moving in line with the central bank’s projection but risks, such as U.S.-China trade tensions, could disrupt the path toward achieving the central bank’s 2% inflation target.

“We can expect Japan’s economy to recover in the latter half of this year. As such, I see no need to ease policy further now,” Funo told a news conference after meeting with business leaders in Hiroshima, western Japan.

“But we must act without hesitation if changes in overseas and domestic economic conditions hurt Japan’s price momentum or the current favorable job market.”

The comments were the most direct signal to date by a BOJ policymaker that the central bank was in no rush to expand stimulus as long as the economy sustains a moderate recovery.

Prime Minister Shinzo Abe praised the BOJ’s massive stimulus for creating jobs and pulling Japan out of deflation.

“The BOJ’s policies weren’t mistaken,” Abe said. “I hope the BOJ continues to guide policy with an eye on achieving 2% inflation,” he said on Wednesday in a debate with opposition party leaders in Tokyo. He added that the BOJ shouldn’t persist in meeting its target at all cost.

A former auto executive, Funo has consistently voted with the majority of the nine-member board.

HANDS NOT TIED

The widening fallout from the U.S.-China trade war and slowing global demand have forced many major central banks to cut interest rates or shift to a more dovish policy stance.

The BOJ kept policy steady last month but governor Haruhiko Kuroda stressed his readiness to boost stimulus if the economy loses momentum to achieve his 2% inflation target.

Some analysts say the central bank could ease policy further as early as this month, when it conducts a quarterly review of its growth and inflation forecasts.

Funo said the trade conflict had yet to affect companies’ plans for capital expenditure. Japanese manufacturers have also become more resilient to the effects of a strong yen on profits as they shift more production overseas, he said.

But he warned that external risks warranted close attention as they could force changes to the BOJ’s projection that Japan’s economic growth will rebound in the latter half of this year.

“I don’t see the need to top up stimulus now,” he said. “But we’ll keep an eye out on how things unfold ahead of this month’s meeting and those beyond,” he said.

Funo said overseas demand will likely pick up as stimulus measures taken by China prop up growth and help boost Japan’s exports.

Japan’s economy expanded by an annualized 2.1% in the first quarter but many analysts predict growth will slow in the coming months as the U.S.-China tariff row hurts business sentiment and profits. A scheduled sales tax hike in October may also curb consumption, they warn.

The BOJ faces a dilemma. Years of heavy money printing has failed to fire up inflation and strained financial institutions’ profits by narrowing their margins with ultra-low rates.

It is also left with little ammunition to battle the next recession, as its aggressive bond buying has led to it owning nearly half of the country’s long-term debt and crushed bond yields to levels at or below zero.

Funo said the BOJ would take into account the impact any further easing might have on Japan’s banking system, but added that there was still room to top up monetary support.

“I don’t think our hands are tied in terms of what we can do” if the BOJ were to ease further, he said.

Under a policy dubbed yield curve control (YCC), the BOJ guides short-term rates at minus 0.1% and long-term rates around 0% via heavy asset buying to accelerate inflation to its target.