TOKYO Japan's Finance Ministry Wednesday ruled out any plan for the Bank of Japan to buy government bonds in effect printing money to fund an economic rescue. The ministry was reacting to a story in London's Financial Times which quoted ruling party member Ichiro Ohara as suggesting the tactic as an emergency, temporary measure. We are not considering (his proposal) at all, said a Finance Ministry official, who declined to be named.

His proposal would raise concerns over inflation, and does not go along with our stance. Japanese legislation has banned the Bank of Japan from buying government bonds since World War II after the manoeuver caused runaway inflation. Japan is now more concerned with deflation than inflation, however. The Bank of Japan is allowed to roll over 10-year government bonds it already holds as they mature, but only in pressing circumstances with parliamentary approval, the Finance Ministry official said.

Ohara, a close adviser to Orime Minister Keizo Obuchi, was quoted as telling the Financial Times that he wanted the Central Bank to buy government bonds for two years. This can be done with the understanding that it is a temporary measure, he told the newspaper. We have to work with all our might to revive the economy. An official in Ohara's office confirmed that he was working on a proposal for the Central Bank to buy government bonds but could not provide details.

Ohara was not immediately available for comment. Japanese government bond prices slid to a 20-month low as banks sought to flee the sinking market before the end of the financial year but found few buyers, traders said. (AFP)