UPDATE 1-Japan can't consider stimulus exit now-MOF official

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By Kazunori Takada

SINGAPORE, Nov 12 (Reuters) - Japan cannot consider an stimulus exit policy yet because of severely weak domestic demand and a gloomy corporate outlook, a senior finance ministry official said on Thursday.

Speaking after Asia-Pacific finance ministers committed to economic stimulus plans until a sustained recovery was under way, Parliamentary Finance Secretary Shinichiro Furumoto said that further measures would depend on the funding situation.

"We have to look at our responsibility as the issuer of government debt as well as our responsibility to implement further fiscal measures," Furumoto told Reuters in a group interview.

He said domestic demand was in a "severe" condition and companies' earning outlook for the current year to March was gloomy.

"We are most definitely not in a situation to consider exit policy," he said.

Japanese officials have repeatedly said the government was carefully watching long-term interest rate moves and must be careful to not let rising rates become a trend.

DEBT CRUNCH

Bond investors are increasingly worried about the fiscal outlook for Japan, as the government faces the dilemma of whether to cut spending and risk a return to recession or to let the already huge national debt blow out further.

Bond yields are rising and opinion polls show voters are focusing more on the sky-high debt, already approaching 200 percent of GDP, but slashing spending could worsen the outlook. [ID:nECONJP]

Senior vice minister for the economy Motohisa Furukawa said on Wednesday the government would do its best to maintain the bond market's trust in the government's fiscal discipline.

The International Monetary Fund says Japan's outstanding debt will spiral to 227 percent of gross domestic product next year, by far the worst in the G7.

Finance ministers of Asia Pacific Economic Cooperation economies, following a meeting in Singapore, also agreed to endorse "market-oriented exchange rates that reflect underlying economic fundamentals."

While reiterating the statement, Furumoto said he backed the U.S. policy of maintaining a strong dollar -- a stance reaffirmed by U.S. Treasury Secretary Timothy Geithner.

"Geithner, when in Tokyo clearly, said he wanted stability in currency rates and that the dollar should be strong. I obviously support this," he said. (Editing by Anshuman Daga)