CORRECTED-UPDATE 2-BOJ board turned hawkish in April, many saw need for more rate hikes-summary

(Corrects year to 2027, not 2017, in paragraph 5)

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Some saw chance of faster-than-expected rate hikes - summary

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Policy rate might rise more than markets expect - one member

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Some opinions called for reducing BOJ's bond buying

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BOJ kept rates steady in April, saw inflation near 2% for years

By Leika Kihara

TOKYO, May 9 (Reuters) - Bank of Japan board members turned overwhelmingly hawkish at their April policy meeting with many calling for the need to raise interest rates steadily to forestall risks of an inflation overshoot, a summary of opinions at the meeting showed.

Some members saw the chance of a faster-than-expected pace of interest rate hikes on heightening prospects of inflation durably staying, or even exceeding, the BOJ's 2% target, the summary showed on Thursday.

"If underlying inflation continues to deviate upward from the baseline scenario against the backdrop of a weaker yen, it is quite possible that the pace of monetary policy normalization will accelerate," one member was quoted as saying.

The debate underscores BOJ Governor Kazuo Ueda's recent remarks signalling the chance of multiple rate hikes ahead, and heightens the possibility of an increase in short-term borrowing costs in coming months.

At the April meeting, the BOJ kept interest rates near zero and produced fresh quarterly estimates that projected inflation to stay near 2% through early 2027, signalling its readiness to hike borrowing costs later this year.

Many of the opinions shown in the summary called for the need to raise interest rates steadily, and consider reducing the size of the BOJ's bond purchases sometime in the future.

One member said the BOJ should consider raising rates moderately to avoid being forced to hike in a "discontinuous and rapid" way once its price target is sustainably met.

Another said the BOJ must raise interest rates in a "timely and appropriate manner," as the likelihood of achieving its growth and price projections heightens, the summary showed.

"If the outlook shown in our April quarterly report is realized, our 2% inflation target will be sustainably and stably achieved in about two years and the output gap will be positive. Therefore, there's a chance our policy interest rate will be higher than the path currently priced in by the market," another opinion showed.

Many market players expect the BOJ to hike interest rates later this year, though they are divided on how quickly borrowing costs might rise thereafter.

Other opinions also called for the BOJ to indicate, at some point, its intention of reducing its huge bond buying and start shrinking its balance sheet, the summary showed.

"One option is to reduce the Bank's monthly purchase amount of JGBs -- which is currently about 6 trillion yen per month -- based on the market's supply and demand balance to restore market functioning," one opinion showed.

A separate opinion said the BOJ should eventually eliminate its holdings of exchange-traded funds (ETF), even if doing so might take a long time, the summary showed.

In March, the BOJ ended eight years of negative interest rates and other remnants of its radical stimulus including its bond yield control and purchases of risky assets like ETFs.

While the BOJ no longer buys ETFs from the market, it continues to buy roughly 6 trillion yen worth of Japanese government bonds (JGB) per month and has held off on selling bonds or ETFs. (Reporting by Leika Kihara; Editing by Himani Sarkar and Shri Navaratnam)