HIGHLIGHTS-BOJ's Shirakawa: will debate whether room to change price goal

TOKYO, Dec 20 (Reuters) - Bank of Japan Governor Masaaki Shirakawa said on Thursday that the central bank will debate next month whether there is any room to review the level of price growth that it sees as desirable in the long run.

But Shirakawa added that in doing so, the central bank must ensure that it leaves room for flexibility in guiding policy.

Shirakawa spoke after the BOJ delivered its third dose of monetary stimulus in four months on Thursday in a prelude to more aggressive action next year, as it faces pressure from the country's next leader for stronger efforts to beat deflation.

The following are highlights of Shirakawa's comments during his press conference:

INFLATION TARGETING

"The BOJ adopted the current medium- to long-term price goal in February and decided to review it once a year. We also received a request recently from the Liberal Democratic Party's Shinzo Abe to review our price goal.

"That's why we decided to examine at the next policy meeting the level of medium- to long-term price growth the BOJ should be aiming for in guiding monetary policy ...

"The BOJ seeks to achieve 1 percent inflation for the time being. But the level of inflation we aim for could exceed 1 percent if measures to boost Japan's growth potential bear fruit ...

"At the next policy meeting, we will examine whether there is room to review the figures we define as medium- to long-term price stability ... In the process, we need to ensure that policy flexibility is maintained. We also need to take into account how best to maintain financial system stability."

COMMUNICATION WITH THE GOVERNMENT

"I called current Prime Minister Yoshihiko Noda and incoming Prime Minister Shinzo Abe after today's decision to explain the results.

"In the past, I have called the prime minister and other relevant cabinet ministers to explain important monetary policy decisions.

"We will do our utmost as a central bank to end deflation and cooperate with the government. The government also plays a role. Deregulation and steps to promote sustainable economic growth are necessary to end deflation.

GOVERNMENT BOND PURCHASES

"The BOJ will not buy Japanese government bonds in order to monetise public debt. When you look at the bond market, yields are low. Still, efforts are needed to improve public finances.

"If they remain low for a long time, this could lead people to forget about the size of public debt and weaken fiscal discipline. This could also make people think there is less incentive for structural reforms.