BOJ must look at downside, upside economic risks, Adachi says
Adachi says BOJ to hike rates if trend inflation heads toward 2
Expects consumer inflation to accelerate summer through autumn
BOJ may hike sooner if sharp yen falls persist, Adachi says
BOJ to reduce bond buying in stages, avoid market disruptions

TOKYOKUMAMOTO, Japan, May 29 Reuters The Bank of Japan may raise interest rates if sharp falls in the yen boost inflation or the public39;s perception of future prices move more than expected, board member Seiji Adachi said on Wednesday.

While shortterm currency moves alone would not trigger a policy shift, the central bank could raise interest rates if excessive yen falls persist and have a big impact on inflation expectations, Adachi said in a speech.

He also said the BOJ must look not just at downside risks to the economy and prices, but upside risks, in guiding policy.

We must by all means avoid raising interest rates prematurely. But by focusing too much on downside risks, we could see inflation accelerate in a way that forces us to tighten monetary policy sharply later on, Adachi said.

As long as underlying inflation continues to head toward 2, it39;s important to gradually adjust the degree of monetary support reflecting economic, price and financial developments, he said, signalling the chance of a nearterm rate hike.

The remarks highlight the growing significance a weak yen could have on the timing of the BOJ39;s next interest rate hike, which…