* High liquidity prompts lift in stock weighting
* Fund managers focus on Fed monetary policy
* Cash positions rise as yen strength heightens uncertainty
By Akiko Takeda and Chikafumi Hodo
TOKYO, Oct 28 (Reuters) - Japanese fund managers have raised their weighting for equities to the highest level in 10 months on views ample liquidity provided by Japanese and U.S. central banks should allow them to take more risk, a Reuters survey showed.
Fund managers increased their exposure to stocks reflecting overall gains in global share prices in the past month in anticipation that the U.S. Federal Reserve will ease credit further next week to bolster its struggling economy.
They cut their exposure to bonds to the lowest since December as interest rates in developed countries are at low levels, while the latest move by the Bank of Japan to pump more liquidity to keep interest rates virtually at zero.
The persistent strength of the yen continued to hurt prospects for the export-led Japanese economy, prompting money managers to raise cash positions in the month.
"U.S. shares tend to perform well after a mid-term election. We need to watch U.S. President (Barack) Obama's policy closely," said Kenichi Kubo, a senior fund manager at Tokio Marine Asset Management, referring to U.S. elections scheduled for Nov. 2.
"The market has been pricing in possible quantitative easing at the Federal Open Market Committee meeting. But share prices could come under profit-taking pressure if the Fed fails to meet market expectations on credit easing."
Fund managers raised their average weighting for equities in October for the third straight month to 46.6 percent, the highest since December, from 45.7 percent the previous month.
The weighting for bonds fell to 46.8 percent in October from 48.5 percent a month earlier.
Asset managers' cash positions increased to 3.7 percent after falling to a low for this year of 2.9 percent in September.
Their weightings for real estate and alternative assets were unchanged at 1.3 percent and 1.5 percent respectively.
The Reuters poll of 13 asset management companies was conducted on October 14-22 during which Japan's key Nikkei stock average slipped to a three-week closing low as the yen advanced to a fresh 15-year peak against the dollar.
Japanese stocks have faced pressure from the yen, which firmed to a fresh 15-year high of 80.41 against the dollar on Monday, approaching a record high of 79.75 yen.
The 10-year Japanese government bond yield has edged up since slipping to a seven-year low of 0.820 percent reached earlier in the month.
In terms of regional equities allocations, weightings for Japan jumped 6.3 percentage points to 27.4 percent, the highest since October 2004, although this was largely due to a change in the poll's methodology.
Equities dropped for North America, Britain and Asia, the poll showed.
Fund managers' weighting for bonds in Japan also rose, while exposure to the euro zone, North America, Britain and Asia dropped. (Editing by Joseph Radford)