* BOJ's Kamezaki says effect of stimulus steps uncertain
* Kamezaki: swift action may be needed on economy
* Kamezaki: too soon to consider ending unconventional steps
* Govt may drop word "worsening" to describe economy
By Tetsushi Kajimoto
SHIZUOKA, Japan, June 3 (Reuters) - Bank of Japan policy board member Hidetoshi Kamezaki warned on Wednesday that the waves of government debt being issued around the world to fund stimulus measures could push up interest rates.
Still, analysts say the steepening yield curve is unlikely to spur Japan's central bank into buying more government bonds as such a move would not do much to curb rises in long-term rates.
Bond yields worldwide have been climbing in the past few weeks, partly on concerns about financial markets' ability to digest all the debt being issued.
"There is uncertainty over whether huge government bond issuance could push up interest rates ... As such, the risks to the economy and prices are mostly to the downside," Kamezaki said in a speech to business leaders in Shizuoka, southwest of Tokyo.
"It's important to ensure that fiscal discipline and market confidence in monetary policy are maintained," he addd at a news conference later in the
But he added that it was unclear what was driving yield moves at the moment, echoing doubts expressed by Federal Reserve officials recently.
"I don't think current interest rate moves are one-sided. On the one hand they're moving on expectations about the economic outlook with hopes of it bottoming out. On the other hand, they are reflecting market views about the fiscal outlook."
Japan is set to boost bond issuance from July to finance a record $160 billion economic stimulus package to help it get out of its deepest recession in decades.
Longer-dated Japanese government bonds have been sold off, even as short-term JGBs have held firm due to market expectations that the BOJ is unlikely to raise interest rates anytime soon, on concern over increases in debt issuance.
That mix has caused the yield curve to steepen, pushing the spread between two- and 20-year yields to 183 basis points on Tuesday, the widest since October 2005.
In the United States, the yield gap between two- and 10-year Treasuries widened to a record 277 basis points on Tuesday.
Hopes that Japan's economy may be over the worst were also behind the 10-year JGB yield's rise to its highest in more than seven months on Wednesday.
"Yield curve steepening is a common concern for global bond investors, as in the long term there might be inflation if central banks fail in their exit policies," said Masamichi Adachi, a senior Japan economist at JPMorgan Securities.
"There is also concern about sovereign risk. While no one expects the United States or Japan to default, these are very uncertain times. These concerns also apply to Japan."
NO EXIT IN SIGHT
Mindful of downside economic risks, Kamezaki, a former trading house executive who has mostly toed the BOJ's official line on policy, said the BOJ may need to act swiftly to support the economy if changing circumstances warrant a policy response.
He didn't elaborate on what action the BOJ could take, but he said the bank should stick to low interest rates and steps to support corporate financing.
"Kamezaki's comments today showed the BOJ is nowhere near considering normalising policy given the economic conditions," said Junko Nishioka, chief Japan economist at RBS.
The BOJ has cut interest rates to 0.1 percent and increased its outright JGB buying to 21.6 trillion yen ($225.8 billion) per year in March. It also buys commercial paper and corporate bonds from banks, a move that expires in September.
The BOJ has said it has no intention of monetising government debt and it is not aiming directly at pushing down bond yields.
"The BOJ basically stood by when Japanese bond yields shot up from 0.43 percent to above 1.6 percent in 2003," said Naomi Hasegawa, senior strategist at Mitsubishi UFJ Securities.
"I doubt the BOJ will do something now even if the 10-year bond yield rises a bit from the current levels around 1.5 percent."
Finance Minister Kaoru Yosano said on Tuesday that Japan's worst post-war recession had already hit bottom, but he said a full recovery may not come until early next year.
The government will examine upgrading its economic assessment for the second month running in June, a government official with direct knowledge of the matter told Reuters on Wednesday.
Such a move would reflect modest signs of improvement in exports and a rebound in factory output, which jumped in April at the fastest rate in more than half a century. (Additional reporting by Leika Kihara, Stanley White, Hideyuki Sano; Editing by Hugh Lawson)