Bank of Japan Deputy Gov. Toshiro Muto said Tuesday that keeping interest rates low for too long could hurt economic growth.

"We need to pay attention to risks that could emerge should the stimulus from monetary policy become amplified," Muto said in a speech in Tokyo, according to a draft posted on the central bank's Web site.

Keeping rates too low "could cause large swings in economic activity and inflation, raising the risk of distortions in capital and resource allocation."

Fellow board member Kiyohiko Nishimura said in Washington it would be imprudent for the BOJ to keep rates on hold for a long time because it may lead to volatile changes in economic growth and prices. At 0.5 percent, Japan's borrowing costs are the lowest among major economies.

Investors and economists predict the central bank will raise the key rate to 0.75 percent in August, after the July 29 Upper House election and the publication of second-quarter economic growth figures. Both Muto and Nishimura said the BOJ has no preset schedule for raising interest rates.

"The pace at which necessary adjustments will be made is based on forthcoming improvements in the economy and prices," Muto said. "It's not as if they are prescheduled."

Muto said the central bank will conduct policy "appropriately" and closely assess risks while working to achieve sustainable growth amid price stability.