Japan LDP official: BOJ may need to mull rate hike

TOKYO, Aug 26 (Reuters) - The Bank of Japan may need to consider an interest rate hike to help boost people's interest income, a senior ruling party official was quoted as saying on Tuesday.

"Interest rates have been kept low for so long. This may be negatively affecting consumption," Takashi Sasagawa, head of the ruling Liberal Democratic Party's general council, was quoted as telling officials of Japan's biggest business lobby, the Keidanren.

"From now on, providing some measure of interest income should be considered in terms of interest rate policy," a Keidanren official quoted Sasagawa as saying.

Household investors have been stuck with interest rates near zero for more than a decade, a vestige of Japan's efforts to escape deflation and the bursting of the stock and property market bubble in the early 1990s.

But in financial markets, the possibility of a rate hike in the near future is seen as virtually nil after the central bank gave a bleak assessment of Japan's economy when its policy board met last week, and kept its key overnight call rate target at 0.5 percent.

The government is set to compile an economic package this month to help businesses and individuals cope with high oil and food prices, which a senior ruling party lawmaker said could be worth 2-3 trillion yen ($18-27 billion). [ID:nT337029] (Reporting by Kentaro Hamada, writing by Yuzo Saeki; Editing by Edwina Gibbs)