By Leika Kihara
TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe waded into the growing global debate about currency wars for the first time on Wednesday, shrugging off criticism that Tokyo was trying to intentionally weaken the yen with its monetary and fiscal stimulus measures.
"The measures taken by the government and the BOJ are aimed at beating deflation and achieving sustainable economic growth," Abe said, when asked by an opposition party leader in parliament about criticism from some overseas policymakers that the steps were attempts by Tokyo to directly weaken the yen.
It was his first public comment on the issue.
German Chancellor Angela Merkel last week singled out Japan as a source of concern following recent moves by its central bank to quicken the pace of money-printing.
South Korea has also been vocal in recent days, with the governor of the central bank saying on Saturday that Japan's latest monetary easing had "created problems.
Talk about a currency war dominated discussions at the World Economic Forum in Davos last week, with many central bankers and business executives questioning the wisdom of continuing easy money policy.
Central bankers in advanced countries, notably Japan and the United States, have been pursuing aggressive action to reflate their economies. This has had the effect of weakening their currencies, prompting investors to move a wall of cash into more attractive markets such as South Korea and forcing their currencies higher, making their financial markets more volatile and threatening their export competitiveness.
Abe also kept up pressure on Bank of Japan to expand monetary stimulus, calling for bold measures to achieve its new 2 percent inflation target.
"I strongly hope that the Bank of Japan pursues bold monetary easing to achieve (2 percent inflation) as soon as possible," he told parliament.
Under pressure from Abe for more aggressive efforts to beat deflation, the central bank last week doubled its inflation target to 2 percent and made an open-ended commitment to buy assets from next year.
In a meeting of the government's top economic panel held two days after the BOJ's rate review, BOJ Governor Masaaki Shirakawa suggested that the bank may increase asset purchases even further to inject funds into the economy.
As part of his plans to revive the economy, Abe has also pledged big fiscal spending that led to his government compiling a 10.3 trillion yen ($114 billion) extra stimulus package.
But in a $1.02 trillion draft budget for the next fiscal year approved on Tuesday, the government aims to keep new bond sales below tax revenues in a symbolic move to show its resolve of continuing with efforts to fix Japan's tattered finances.
"While we need to revive Japan's economy, it's also important to restore fiscal health," Abe told parliament.
($1 = 90.6500 Japanese yen)
(Additional reporting by Tetsushi Kajimoto; Editing by Shinichi Saoshiro & Kim Coghill)
(c) Copyright Thomson Reuters 2013. Check for restrictions at: http://about.reuters.com/fulllegal.asp