Japan PM Ishiba says he won't intervene in BOJ's rate policy

By Leika Kihara

TOKYO, Oct 12 (Reuters) - Japanese Prime Minister Shigeru Ishiba said on Saturday he would not intervene in monetary policy affairs, as the central bank is mandated to achieve price stability.

"It's important to avoid vocally intervening" in monetary policy affairs, or appear as if he was doing so, Ishiba said in a news conference gathering leaders of major parties ahead of the Oct. 27 general election.

"Whatever the government has to say, the Bank of Japan makes an individual decision on policy," Ishiba said. "I believe the BOJ's governor and staff have a strong sense of responsibility over achieving price stability."

Ishiba also said strength in consumption is key to achieving a sustained exit from deflation, calling for the need for measures to boost real wages.

The former defence minister became Japan's prime minister on Oct. 1 after winning the ruling party's leadership race.

A day after assuming the role, Ishiba stunned markets by saying the economy was not ready for further interest rate hikes, an apparent about-face from his previous support for the BOJ unwinding decades of extreme monetary stimulus.

The surprisingly blunt remarks pushed the yen lower against the dollar and cast fresh doubts over how aggressive the BOJ would be in raising rates.

It is historically rare for the country's leader to comment directly on the BOJ's interest rate policy in public, as it would infringe upon the central bank's independence - stipulated by law - in setting monetary policy.

The BOJ ended negative interest rates in March and raised the short-term benchmark to 0.25% in July on the view Japan was making progress towards durably achieving its 2% inflation target.

Governor Kazuo Ueda has signalled the bank's readiness to keep raising interest rates if economic and price developments move in line with its forecast.

While politics is unlikely to derail the longer-term case for rate hikes, analysts say uncertainty on Ishiba's stance on monetary policy and the outcome of the Oct. 27 election could complicate the BOJ's decision on how soon to raise borrowing costs.

(Reporting by Leika Kihara; Editing by Sam Holmes)