Bank of Japan policy board member Hidetoshi Kamezaki said Japan's economic recovery lacks strength as export growth will likely moderate and government stimulus steps are set to expire.

Kamezaki also said the euro's weakness against the yen could affect Japanese firms' export competitiveness, which could hurt the overall economy, but analysts said his remarks did not herald immediate action from the central bank.

Kamezaki expressed concerns about the yen's appreciation. But his comments are not implying the central bank is ready to do something to stem the yen's rise, said Takeshi Minami, chief economist at Norinchukin Research Institute.

Kamezaki struck a relatively cautious tone compared with BOJ Deputy Governor Hirohide Yamaguchi, who said last week the world's No.2 economy is showing further signs of a moderate recovery thanks to increases in exports and production.

The economy's levels are still lower than the levels before the Lehman shock. This means it is not yet in a strong recovery led by sustainable moves in domestic demand, Kamezaki told business leaders in Sapporo, northern Japan, on Wednesday.

Kamezaki said the pace of growth in Japan's exports will likely gradually moderate as companies' inventory restocking and government stimulus globally run their course.

He said Greece's credit problems could indirectly affect Japan's economy due to the impact on its major export destinations such as China and United States, while the strength of emerging economies could pose a risk if they overheat and lead to strong monetary policy tightening.

Kamezaki also said the central bank will make the utmost efforts for the economy to escape deflation, but gave no clues as to what policy steps are in store.

TATTERED FINANCES

Japan's economy grew an annualised 5 percent in the first quarter of this year, but economists say the government, its hands tied by Japan's huge fiscal debt, could turn to the central bank to ease its already super-loose monetary policy further should it see any risk to the economic recovery.

The government vowed to cap spending and new bond issuance for next fiscal year at this year's levels in budget guidelines set on Tuesday, in an effort to fix tattered public finances, but some analysts doubted the targets will be met.

Deputy Governor Yamaguchi said last week the central bank is watching currency moves carefully but shrugged off any suggestion that rises in the yen to a specific level would trigger more monetary easing.

While yen moves alone are unlikely to produce an immediate policy response from the BOJ, sharp yen gains accompanied by stock market falls deep enough to threaten the economy's recovery could lead to further monetary easing.

The BOJ, which has kept interest rates at 0.1 percent since late 2008, eased policy further by putting in place a cheap loan programme in December 2009 under government pressure. It expanded the scheme in March.

In June, the BOJ announced details of a new loan scheme aimed at encouraging commercial banks to lend more to industries with growth potential, although analysts say the scheme will do little to boost the economy.

Kamezaki, a former executive at a Japanese trading house, has recently voted with the majority of the board and toed the BOJ's official line on monetary policy. He left the door open to more monetary easing in March, soon after the BOJ's latest easing, warning that deflation is starting to affect public perceptions about future prices and may complicate the country's exit from persistent price falls. (Editing by Michael Watson)

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