Bank of Japan Governor Haruhiko Kuroda said Tuesday that cutting interest rates would be a "nimble and effective" monetary easing option following a recent review aimed at making the current policy framework sustainable in the midst of the coronavirus pandemic.

Japan's economic activities and prices are expected to remain under downward pressure for an extended period and the central bank will not hesitate to take additional easing measures if necessary, Kuroda told an event hosted by Kyodo News.

Bank of Japan Governor Haruhiko Kuroda gives a speech in Tokyo on March 30, 2021. (Kyodo) ==Kyodo

The BOJ carried out an assessment of its policy tools at its March 18-19 meeting as the pandemic has moved its already elusive 2 percent inflation target further away.

It decided to establish a scheme to mitigate the impact of potential rate cuts on financial institutions and encourage them to extend loans.

"This scheme enables the Bank of Japan to cut short- and long-term interest rates nimbly without hesitation while considering the impact on the functioning of financial intermediation," Kuroda said.

"Cutting those rates is an important option as a nimble and effective additional easing measure."

The BOJ chief said the review has "strengthened" the easing framework, in that it will enable the central bank to pursue monetary easing "more strongly than before."

Prior to the review, the BOJ faced criticism that its program to keep short-term interest rates at minus 0.1 percent and guiding 10-year Japanese government bond yields around zero percent has made the bond market moribund and aggressive purchases of exchange-traded funds have distorted market functions.

The BOJ expanded the range in which the yield of 10-year government bonds is allowed to move to minus 0.25 percent to 0.25 percent from the previous, implicit target of minus 0.2 percent and 0.2 percent.

"Clarifying the (allowed) range of fluctuations is part of our efforts to strengthen communication with markets," Kuroda said in a question and answer session of the online event.

Kuroda acknowledged that the tools the BOJ employs have become "complex" as it seeks to boost the effectiveness of monetary easing and address side-effects.

He said the bank believes it possible to achieve the 2 percent inflation target by continuing with monetary easing.

Japan's core consumer price index excluding volatile fresh foods dropped 0.4 percent in February from a year ago.