UPDATE 1-Fed's Fisher says Japan's easing shouldn't pressure Fed

Thu Apr 4, 2013 12:07pm EDT

NEW YORK, April 4 (Reuters) - Japan should carry out monetary policy as it sees fit, a top Federal Reserve official said on Thursday, but its aggressive stimulus plan should not pressure the U.S. central bank to continue its own asset-buying program.

"It's not my or anybody else's role to approve or disapprove" of Japanese plans to inject $1.4 trillion into its struggling economy, Dallas Federal Reserve President Richard Fisher told Bloomberg TV. "They have to conduct policy the way they want to conduct it."

The Bank of Japan's open-ended asset buying program, designed to pull the long suffering economy out of deflation, would nearly double the monetary base by the end of 2014.

But Fisher said it should not pressure the Fed to step up its own asset purchases program, known as quantitative easing, or QE, which Fisher wants to start winding down later this year.

"There is no QE to infinity. We already have a very active program," he said. "But this isn't going to go on for ever and ever ... There are limits. We just have to figure out what those limits are."

The Fed last month pledged to press on with its $85 billion in monthly bond purchases despite calls by Fisher and others to consider scaling back the purchases.

It is also committed to keeping interest rates near zero until the unemployment rate drops to 6.5 percent, as long as inflation is not forecast to go above 2.5 percent over a one- to two-year horizon.

Economists surveyed by Reuters expect U.S. employers added 200,000 new workers to their payrolls last month. That would be below the 236,000 jobs created in February but comfortably above recent monthly averages. The jobless rate likely remained at 7.7 percent. [ID: nL2N0CO1HF]

Fisher also urged lawmakers to remove the implicit government guarantees enjoyed by large banks that are seen as "too big to fail."

He said expectations that the banks will get a government bailout if they collapse give them an unfair advantage over smaller rivals.

"There is a cost of funding advantage and it is substantial. And it is unfair," he said. "We need to level the playing field."