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Japan's Maehara: sees BOJ foreign bond buying idea as liquidity tool

Thursday, 4 Oct 2012 | 4:22 AM ET

TOKYO, Oct 4 (Reuters) - Japan's new Economics Minister Seiji Maehara, an advocate of allowing the Bank of Japan to buy foreign bonds, said on Thursday it should be considered a tool to supply funds to the financial system, not a means to manipulate currencies.

Maehara has been a vocal advocate of allowing the BOJ to buy foreign bonds, but his comments suggested he was trying to tone down his stance after it raised concerns that it would amount to currency manipulation.

The government wants the BOJ to take bold measures to quickly achieve a 1 percent rise in consumer prices, which is the central bank's understanding of price stability, Maehara told reporters in a group interview.

The government and the BOJ could discuss what tools are appropriate for monetary policy, but because of the BOJ's independence it is up to the central bank to decide what tools to actually use, he said.

The BOJ is expected to keep monetary policy unchanged at a two-day meeting ending on Friday even as weakening manufacturing activity in Asia continues to cloud the outlook, preferring to take more time to review the effect of its policy loosening last month.

Maehara said he is arranging to attend the BOJ board meeting on Friday to express his views on policy, and would like to attend future meetings as much as possible.

Maehara was appointed to his post on Monday in a cabinet reshuffle as Prime Minister Yoshihiko Noda prepares for an election.

Newly appointed Finance Minister Koriki Jojima reiterated on Wednesday that he is reluctant to allow the Bank of Japan to buy foreign bonds.

Maehara's support of such action has fuelled speculation that the government could amend the law to allow such purchases.

(Reporting by Stanley White; Editing by Michael Watson)

((stanley.white@thomsonreuters.com)(+81 3 6441 1984)(Reuters Messaging: stanley.white.reuters.com@reuters.net))

Keywords: JAPAN ECONOMY/MAEHARA