By Leika Kihara

TOKYO (Reuters) -Bank of Japan Deputy Governor Masazumi Wakatabe said on Wednesday the central bank must not withdraw monetary stimulus prematurely even if rising raw material costs push up inflation.

An advocate of aggressive monetary easing, Wakatabe also said the BOJ would not shift away from its ultra-loose policy even if the U.S. Federal Reserve enters a tightening cycle.

Unless accompanied by strong domestic demand, cost-push inflation alone will not generate a sustained pick-up in prices toward the central bank’s 2% target, he said.

“It’s crucial to avoid tightening easy monetary conditions prematurely by looking just at near-term moves in the core consumer price index,” Wakatabe said in a speech at an online meeting with business leaders from Hiroshima, western Japan.

Wakatabe said Japan’s economy was likely to continue recovering with strength in corporate activity offsetting the weakness in private consumption.

The focus would be on whether households and companies start tapping their huge savings and start spending once the pandemic’s impact dissipates, he said.

(Reporting by Leika Kihara; Editing by Chang-Ran Kim and Christopher Cushing)