UPDATE 2-Half of Japan firms want BOJ steps extended-survey

* Many firms see funding conditions as still severe - survey

* Finance minister calls for BOJ steps to be extended

TOKYO, July 14 - Half of big Japanese firms want the Bank of Japan to extend its unconventional measures aimed at easing corporate funding strains when they expire in September, a Reuters survey showed on Tuesday.

With the world's second-biggest economy still barely picking up from its deepest recession in decades, the central bank is likely to extend the measures, which include buying commercial paper and corporate bonds from banks, beyond their September expiry.

The BOJ may announce its decision to keep the measures in place after its two-day policy review that ends on Wednesday, or at its following meeting in August.

Of the companies surveyed, 49 percent said they wanted the BOJ to extend its programme of offering long-term loans to banks at 0.1 percent interest, while only 18 percent said the step was no longer necessary.

The survey showed that 42 percent wanted the BOJ's commercial paper buying to be extended, while 22 percent wanted it scrapped. For the BOJ's corporate bond buying, 41 percent wanted this extended, while 22 percent said it should end in September.

Many companies said the measures should be maintained as a stopgap because the economy was still in bad shape and financial conditions have hardly normalised.

"Banks are very cautious about lending money so we're worried that funding conditions may worsen further for regional firms," a company in the retail sector said in the survey.

The survey was conducted from June 26 to July 13 on 400 big companies, of which 226-227 companies replied.

The majority view within the BOJ is that the extraordinary measures should be extended beyond their September deadline without significant changes.

While some BOJ officials say signs of recovery in the economy and in credit markets may call for a retreat from the measures, most argue conditions remain tough enough to warrant such an extension.

Finance Minister Kaoru Yosano called on the central bank to keep buying commercial paper and corporate bonds beyond September despite signs of recovery in credit markets.

"Even though these steps may not be used, the BOJ might as well leave the door open for CP and corporate bond buying as crisis measures," he told reporters on Tuesday.