A key economic adviser to Prime Minister Shinzo Abe criticised the Bank of Japan for its negative interest rate policy and called for bolder fiscal measures to underpin a fragile economy.

Koichi Hamada, professor emeritus of economics at Yale University, said the BOJ must ensure interest rates do not fall to a "reversal rate," or a level that could do more harm than good by crippling financial institutions' ability to lend.

"Negative interest rates hurt, particularly smaller financial institutions' health, so the BOJ must try to avoid a situation where interest rates reach a level deemed as a reversal rate," Hamada said.

"There are limits to how much the BOJ can fine-tune the yield curve. In such cases, it's necessary for fiscal policy to coordinate with monetary policy in such a way as to push up real and nominal interest rates," he told.

Hamada is among the architects of stimulus programme deployed by Abe nearly seven years ago. Dubbed "Abenomics", the strategy is based on bold monetary easing, flexible fiscal policy and structural reform. His remarks come as Abenomics reaches a turning point, with the boost to growth from the monetary and fiscal policy components tapering off.