REFILE-UPDATE 1-Japan opposition party submits inflation target

(Adds dropped words 'the bill' in 3rd paragraph) (For more stories on the Japanese economy, click [ID:nECONJP])

* Bill unlikely to be passed but puts pressure on BOJ

* Would require BOJ to achieve inflation target set by govt

* BOJ Gov Shirakawa: shouldn't guide policy by prices alone (Adds quotes from BOJ Governor Shirakawa )

By Tetsushi Kajimoto and Leika Kihara

TOKYO, Nov 19 (Reuters) - A small opposition party submitted a bill to Japan's parliament on Friday requiring the Bank of Japan to meet an inflation target to be set by the government.

The measure has little chance of becoming law but will keep pressure on the central bank to do more to beat deflation.

Submitted by the Your Party, which has 16 seats in parliament and has been a strong advocate of revising laws governing the BOJ, the bill chimes with calls from some ruling party lawmakers who want the central bank to set a binding inflation target and make a greater commitment to overcoming price declines.

"The (ruling) Democrats and (opposition) New Komeito are discussing a revision to the BOJ Law so we would like them to consider this," Your Party leader Yoshimi Watanabe told reporters after submitting the bill to parliament's upper house.

The bill is unlikely to complete its passage in the current parliament session running until next month. But it could have some influence if the ruling Democratic Party, which controls the powerful lower house but does not hold a majority in the upper chamber, wants Your Party's help in passing other bills.

For now, mainstream ruling party lawmakers are hesitant to force the BOJ to adopt a strict inflation target. They welcomed the central bank's monetary easing steps last month and are not calling for radical changes in the BOJ Law.

Still, some analysts say Your Party's views may gain momentum next year if politicians begin to fret about an expected slowdown in Japan's economic growth, which could prompt the BOJ to cut its upbeat economic forecasts.

"It's unrealistic to expect such a bill to be passed by parliament anytime soon," said Naomi Hasegawa, a senior strategist at Mitsubishi UFJ Morgan Stanley Securities. Bills that fail to pass the session that ends Dec. 3 will be scrapped.

"But you can't disregard the possibility of mounting political pressures on the central bank again," Hasegawa said.

POSSIBLE HEADACHE

The bill would require the government to set an inflation target and present it to the BOJ, which would be responsible for achieving it.

The government could dismiss BOJ executives if the bank failed to achieve the target and could not give a reasonable explanation of why not, according to the Your Party bill.

That would be a radical change from the current BOJ Law, which guarantees the central bank's independence from the government. The BOJ governor cannot be forced to resign by the government under current rules.

BOJ Governor Masaaki Shirakawa said on Friday the bank's view on the price outlook was in sync with that of the government, suggesting the two were working closely to overcome deflation.

"Monetary policy should not be implemented just by looking at prices. We need to look at the overall balance of the economy," he told parliament.

The Your Party's view could create a headache for the BOJ in the first half of next year, when two of its nine board members see their terms expire. Nominees for the posts need approval from both houses of parliament.

The BOJ last month eased monetary policy by pledging to keep rates effectively pegged at zero until the end of deflation was in sight and announcing a plan to spend 5 trillion yen ($60 billion) on assets ranging from government bonds to corporate debt.

It sets a loose reference of desirable consumer inflation at around 1 percent but has resisted calls for a binding price target, arguing that doing so would deprive its policy of flexibility. (Editing by Joseph Radford and Michael Watson)