By Tetsushi Kajimoto
KOBE, Japan (Reuters) - Japan will ease monetary policy appropriately if necessary, while keeping an eye on the impact of the yen's rise on the economy, Bank of Japan Governor Masaaki Shirakawa said on Sunday.
Shirakawa, speaking at an event hosted by the Japan Society of Monetary Economics in Kobe, western Japan, also said the BOJ was watching the "downside risk" to the economy more closely.
He said the Japanese central bank had done the most aggressive easing in the world when looking at the size of its balance sheet in comparison with gross domestic product but that it did not mean he saw no need for further action.
"We'll respond (to the need of easing) timely and appropriately," Shirakawa told the seminar.
Tokyo intervened in the currency market on September 15 by selling yen for the first time in more than six years as the yen's surge to a 15-year high versus the dollar threatened to derail Japan's export-reliant recovery and worsen deflation.
The BOJ's next scheduled policy meeting is on October 4-5. Easing policy at this meeting cannot be ruled out, and options include increasing government bond purchases and expanding a cheap fund-supply tool, sources say.
(Reporting by Tetsushi Kajimoto; Editing by Nick Macfie)