It is too early for the European Central Bank to judge whether a further interest rate cut is needed but the impact of Japan's easing must be closely monitored, ECB Governing Council member Ewald Nowotny said on Saturday.

"It's still too early. In Europe, we have very expansionary monetary policy and it is too early to judge if further steps should be taken," the Austrian central bank governor told reporters.

The ECB decided to leave interest rates on hold at its April policy meeting, but ECB President Mario Draghi said the bank would "monitor very closely" all data and stand "ready to act" to boost the recession-hit euro zone.

The euro fell on Friday as investors rowed back on earlier expectations for a rate cut from the already record-low 0.75 percent as soon as next month.

Nowotny, in Washington to attend meetings of the International Monetary Fund, said the euro had been relatively stable against the U.S. dollar and played down a recent increase against the yen following extra stimulus from the Bank of Japan.

"It's a short-term appreciation and not a long-term development," he said, noting the impact of the BoJ easing had so far been muted.

"However, you have to say that it is a very bold experiment. As far as the exchange rate goes (against the yen), we are at the same level we were two years ago. That means I don't see any massive threat to Europe," he said.

"However, you have to monitor this development very closely. If this dynamic were to continue, those would be moves of a relevant magnitude."

A stronger exchange rate would crimp recovery in the euro zone's economy, which the IMF expects to contract by 0.3 percent this year.

(Reporting by Krista Hughes; Editing by Andrea Ricci)