By Makiko Yamazaki
TOKYO, Sept 30 (Reuters) - Private-sector members of Japan's key economic advisory panel reiterated on Wednesday the need for close coordination between the government and the Bank of Japan on monetary policy, while explicitly stressing respect for the central bank's independence.
The recommendations by the four private-sector members of the Council on Economic and Fiscal Policy (CEFP) mark a shift from May, when the same members urged the BOJ to pay close attention to funding conditions
at smaller firms, a proposal seen as a call for caution on further interest rate hikes.
"While respecting the BOJ's independence in monetary policy operations, the government and the BOJ should share assessments of economic and price developments and work in close coordination, each fulfilling its respective role," the members said in a statement submitted to the panel's meeting.
The CEFP, which is chaired by the prime minister and includes economy-related ministers and the BOJ governor, oversees Japan's fiscal blueprint and long-term economic policies. The private-sector members' proposals form a basis of discussions at the panel.
The careful wording reflects lessons from the market turmoil that followed successive drafts of Prime Minister Sanae Takaichi's annual fiscal and economic blueprint, where references to monetary policy were repeatedly revised by the government to allay concerns over its pressure on the central bank to keep rates low.
The final version of the blueprint inserted a footnote explicitly referring to a legal provision protecting the BOJ's independence in policymaking.
The sensitivity surrounding the BOJ comes as Japan's long-term interest rates have risen sharply as investors price in further BOJ rate hikes, scrutinise Takaichi's spending plans and react to a broader rise in global bond yields.
The private-sector members, two of whom are seen as reflationist aides of Takaichi, stressed in their statement that the recent rise in long-term interest rates cannot be explained by fiscal policy alone.
Japan's primary balance has improved more than that of other major economies and long-term yields have been driven by a range of factors, including monetary policy, inflation expectations and overseas markets, they said.
In a separate document submitted to the panel on Wednesday, the government said it met with bond-market participants from about 20 securities firms, banks and asset managers to explain its policies and gather views on recent bond market developments.
The meetings were held after Takaichi pledged to enhance communication with markets to preserve confidence in Japan's finances.
(Reporting by Makiko Yamazaki; Editing by Muralikumar Anantharaman)
