Japan's economy may get less support than expected from overseas demand as Europe's debt woes escalate and U.S. growth slows sharply, a Bank of Japan policymaker said, painting a bleak picture for the prospects of recovery from the March earthquake and tsunami.

There are already signs Europe's debt woes are hurting that region's banking sector and economy, BOJ board member Ryuzo Miyao said on Wednesday, warning that fast-growing Asian and emerging markets may begin to feel the pinch as the recovery in advanced economies loses steam.

European financial and capital markets remain unstable, Miyao said in a speech to business leaders in Hakodate, in the northernmost Japanese prefecture of Hokkaido.

Risks surrounding Europe's debt problem are heightening.

Miyao, a former academic who is among the most pessimistic board members on the economy, stuck to the BOJ's forecast of a moderate recovery later this year. But he warned of mounting risks such as persistent yen rises and higher energy costs.

Overseas demand may fall more than initially expected as the recovery in U.S. and European economies slows. That may weigh on Japan's recovery, he said.

On monetary policy, Miyao repeated the BOJ's standard view that it will act appropriately when necessary, signaling the central bank's readiness to ease policy further if Japan's recovery prospects come under threat.

Miyao toed the BOJ's line on the underlying economy but struck a cautious note on the outlook due to Europe's debt problems, signaling the chance it may cut its projections in its twice-yearly outlook report in October, said Naomi Hasegawa, senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities.

The BOJ may be forced to ease policy further as early as next month if strains in financial markets send the yen surging and share prices tumbling.

The BOJ eased monetary policy last month by topping up its asset buying program on the same day that Tokyo intervened in the currency market to stem sharp rises in the yen.

It kept its monetary settings steady this month but has expressed its readiness to ease further if its forecast of a moderate economic recovery later this year is threatened.

Analysts polled by Reuters expected the BOJ to ease monetary policy again next month by topping up its asset buying scheme again, with the most likely trigger seen as a renewed yen spike that hurts the recovery.

A former academic and an expert on monetary policy, Miyao has voted with the majority since joining the board last year and has mostly toed the central bank's official line on the economy.

(Editing by Edmund Klamann and Chris Gallagher)