* Aims to keep 2010/11 new debt issuance below Y44 trln
* Govt to present budget guidance on Tuesday (Adds Hatoyama comments)
By Tetsushi Kajimoto
TOKYO, Dec 14 (Reuters) - Japan's coalition government agreed to try to keep bond issuance below 44 trillion yen ($495 billion) next fiscal year, a day before the government is due to set budget guidelines.
The target will be part of the guidelines and was reached despite grudging from a small coalition party that called for aggressive measures to support the economy.
"I want to try as much as possible to keep it within 44 trillion yen," Prime Minister Yukio Hatoyama told reporters on Monday.
The news did little to ease the steepening pressure on the yield curve in Japanese government bond futures.
While the agreement will offer some relief to investors worried about a bond glut, agreeing to "try" to keep issuance below 44 trillion yen is a much looser commitment than the government's earlier pledge to cap issuance at that level.
The People's New Party, a small coalition partner, has criticised government efforts to set a bond issuance ceiling, saying it was focusing too much on fiscal disciplines and neglecting people's life.
Hatoyama last week agreed to increase the size of stimulus measures to 7.2 trillion yen to placate the People's New Party last week, although the government had been originally considering spending of about 2.7 trillion yen.
But the government is running the gauntlet of a sovereign ratings cut after Fitch Ratings said it might downgrade Japan if it significantly exceeded the new issuance target.
The 44 trillion yen goal "has become a yardstick among market players", Kyodo news agency quoted the government as saying in a draft of the budget guideline.
"We set this as an upper limit and will keep (new bond issuance) as low as possible from there," it said.
The policy guidance will also show a path towards fiscal reconstruction, while mapping out fiscal management plans including a mid-term framework with compilation of multiple-year budgets in mind, Kyodo also said.
The government will work to reduce structural fiscal deficits and stably cut the ratio of outstanding public debt to gross domestic product (GDP), Kyodo said.
The government wants to limit bond issuance as Japan's ballooning public debt is projected to hit 200 percent of GDP in 2010/11, by far the highest among major developed countries.
But the target appears difficult to achieve given a plunge in tax revenues as a result of the worst recession in decades. (Additional reporting by Hideyuki Sano, Sumio Ito; Editing by Jan Dahinten) ($1=88.82 Yen)