KOBE, Japan  Bank of Japan board member Toyoaki Nakamura said on Thursday that the central bank will likely need some more time before phasing out its massive stimulus, playing down the chance of a near-term end to its negative interest rate policy.

The remarks follow dovish comments from fellow board member Seiji Adachi on Wednesday, warning against a premature exit from ultra-low interest rates, highlighting uncertainty on how soon the BOJ could roll back ultra-loose policy settings.

Nakamura said Japan's continued economic recovery, tight labour market and an increasing number of workers switching jobs, are heightening the chance that wage growth will eventually exceed the pace of inflation.

But real wages fell from year-before levels for the 18th straight month in September, as inflation hit 2.8% due largely to cost-push factors, he said, stressing the need to maintain ultra-loose policy for the time being.

"We haven't reached a stage where we can say with conviction that sustained, stable achievement of our 2% inflation target, accompanied by wage growth, is in sight," Nakamura said in a speech to business leaders in the western Japan city of Kobe.

A former executive of electronics giant Hitachi Ltd, Nakamura also warned of heightening uncertainty over the global outlook due to lingering inflationary pressure, the potential fallout from aggressive monetary tightening by major central banks, and geo-political tension in the Middle East.

Stubbornly high inflation and the impact of aggressive rate hikes could push the US economy into stagflation, while Europe is facing the risk of recession, he said.

In Japan, big firms appear more keen than before to hike wages, though smaller firms, which employ nearly 70% of Japan's total workforce, need to strengthen profitability to be able to hike pay, Nakamura said.

BOJ officials have stressed the importance of the outcome of next year's annual wage talks between companies and unions in determining whether strong wage hikes achieved this year would become a lasting trend, and allow the BOJ to phase out stimulus.

Under yield curve control (YCC), the BOJ guides the 10-year bond yield around 0%. It also applies a 0.1% charge on a small portion of excess reserves under its negative rate policy.

With inflation exceeding its 2% target for more than a year, many market players expect the BOJ to end both policies next year, with some betting on a policy shift in January.

As rising inflation and global bond yields put upward pressure on Japanese long-term rates, the BOJ relaxed its grip on the 10-year yield in July and October, in a move seen as a prelude to a full-fledged exit from ultra-loose policy.

Nakamura was a sole dissenter to the BOJ's decision in July and October, on the view that such a move must be put on hold until companies' profitability increases further.

  - Reuters