Japan opposition LDP pledges 2 pct inflation accord with BOJ

TOKYO Tue Nov 20, 2012 6:54pm EST

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TOKYO Nov 21 (Reuters) - Japan's opposition Liberal Democratic Party (LDP), which is likely to win a Dec. 16 election, has pledged to set a 2 percent inflation target, media reported on Wednesday, to encourage the central bank to expand monetary stimulus more aggressively.

The LDP will also consider revising laws governing the central bank to increase cooperation with the government on policies ranging from debt management to the possible purchase of foreign bonds, Japanese newspapers reported.

A draft of the LDP campaign platform made no mention of leader Shinzo Abe's controversial proposal that the BOJ should directly underwrite bonds issued for public works projects. Questions about the central bank's independence are likely to be a focal point of election campaigning.

The platform pledges to spend money to improve natural disaster management and evacuation zones following last year's devastating earthquake and nuclear disaster, the draft said.

The LDP also said it would conduct fiscal policy "more flexibly" for the next two to three years and would compile a large stimulus package next year, newspapers reported. The LDP also wants tax breaks for low-income earners after a sales tax hike next year.

On energy, the LDP said it would reach a conclusion within the next three years about whether to restart idled nuclear power plants, according to the draft.

The LDP's platform calls for increased spending on maritime defence and for the government to increase its control of a group of islands that both Japan and China claim as their own.

The election for parliament's lower house is expected to usher in Japan's seventh prime minister in six years, with the LDP likely to return to power after three years in opposition.

Some economists doubt the election will immediately end a policy stalemate that has plagued a country struggling to cope with an ageing population, a declining manufacturing sector and the emerging power of China.

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