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UPDATE 2-BOJ board agreed on need for vigilance on sharp yen moves, easy policy to stay

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Yen's downtrend may reverse upon global shock - BOJ minutes

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Some members saw signs of growing inflationary pressure

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Higher inflation expectations pushing down real rates

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One member warns against tweaking yield target - minutes

(Adds quotes from BOJ minutes, details on policy view)

By Leika Kihara

TOKYO, Sept 28 (Reuters) - Bank of Japan (BOJ) board members agreed the inflationary impact of the yen's recent sharp moves must be closely scrutinised, but policymakers reiterated their resolve to keep policy loose even as the currency's rapid fall has unsettled financial markets.

In minutes of the BOJ's July policy meeting released on Wednesday, one member said the downward pressure on the yen may ease as the global economic slowdown begins to weigh on inflation and long-term interest rates across the world.

"If the global economy experiences a shock, there's a chance the current weak-yen trend could change into a strong-yen trend," another board member was quoted as saying.

At the July 20-21 meeting, the BOJ projected inflation would exceed its 2% target this year in fresh forecasts, but maintained ultra-low interest rates and signalled its resolve to keep monetary super loose.

Analysts blame the BOJ's extremely low rates for accelerating the Japanese currency's declines.

In a surprise move last week, the government intervened in the currency market to stem yen weakness by selling dollars and buying yen for the first time since 1998.

At the July meeting, some BOJ board members said they saw price rises broadening with one seeing a stronger chance Japan can achieve sustained inflation backed by rising wages, the minutes showed.

A few members also said rising inflation expectations were driving down real interest rates and enhancing the stimulus effect of the BOJ's ultra-loose policy.

But the board members agreed on the need to keep ultra-low rates to ensure Japan sustainably achieves their 2% target backed by higher wages.

"It's inappropriate to tweak yield curve control as doing so could weigh on the economy through an increase in long-term interest rates," one member was quoted as saying.

The discussions underscore how the BOJ board members see little need to combat sharp yen declines through rate hikes, even as the currency's falls have been exacerbated by divergence of monetary policies between Japan and the aggressive hawkish turn in other developed economies.

Under yield curve control (YCC), the BOJ guides short-term rates at -0.1% and caps the 10-year bond yield around 0% to reflate growth and sustainably achieve its 2% inflation target.

Core consumer inflation quickened to 2.8% in August, hitting its fastest annual pace in nearly eight years and exceeding the central bank's 2% target for a fifth straight month.

But BOJ Governor Haruhiko Kuroda has dismissed the chance of a near-term rate hike, noting that recent price rises were driven by global commodity inflation and will prove short-lived. (Reporting by Leika Kihara; Editing by Christian Schmollinger & Shri Navaratnam)