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Source: Reuters

INTERVIEW-UPDATE 1-Japan govt keeps heat on BOJ before meeting

Published: 28 Oct 2009 21:22:07 PST

* Govt wants BOJ to support economy with monetary policy * BOJ may end corporate support steps as early as Fri meeting * Govt, BOJ must share common thinking on economy -MOF's Noda * BOJ must fully explain any decision on corporate funding-Noda * Respects BOJ independence, no comment on JGB buying - Noda (Adds comments)

TOKYO, Oct 29 - The government kept up the pressure on the Bank of Japan on the eve of a policy review as the bank seeks to end its support for corporate finance, with a deputy to the finance minister saying the two sides must share a common understanding on economic conditions.

Finance Minister Hirohisa Fuji has criticised the BOJ's view of the economy as too rosy and narrowly informed, pressuring the central bank this week before it reviews support for credit markets.

One of Fujii's deputies, Yoshihiko Noda, said on Thursday the central bank must fully explain to markets any decisions it makes on monetary policy at its meeting on Friday.

"I expect the BOJ will examine each (funding support) measure and discuss this tomorrow, and I'd like to listen closely to the discussion," said Noda, who will attend the BOJ meeting as one of the government's two representatives.

"The BOJ must at least fully explain to the people and markets any discussions and decisions it will make," Noda told Reuters in an interview.

The central bank is leaning towards scrapping its corporate finance support programmes, such as purchasing corporate debt, in December, sources with knowledge of the bank's thinking have said.

The bank's decision could come as early as Friday, when it holds a one-day policy meeting.

Government representatives cannot vote on policy decisions but can voice opinions and request delays in voting, although the bank has the right to reject such requests.

Noda declined to comment when asked how the government would react if the BOJ decides to withdraw its corporate funding support at Friday's meeting.

But he sounded a cautious note on the economy and stressed the need to closely watch the outlook, citing a tough job market even as the economy has shown some signs of picking up.

"It is still important for the BOJ to support the economy on the monetary front," Noda said.

"I hope the government and the BOJ share a common understanding to respond (to economic conditions) while keeping in close contact."

Noda, 52, is an up and coming lawmaker of the Democratic Party of Japan, which swept to power in an election in August.

The Democrats have said they will respect the independence of the central bank but some cabinet ministers have pressured the BOJ to continue its corporate support measures.

Noda said he would give utmost priority to the BOJ's independence, but declined to comment when asked his opinion about whether the bank might boost its government debt buying to curb a rise in bond yields in the future.

"We're not at a stage where I should comment on specific measures," he said.

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