* Govt wants BOJ to support economy with monetary policy
* BOJ may end corporate support steps as early as Fri meeting
* Govt, BOJ must share thinking on economy -MOF's Noda
* BOJ, govt plan meetings to share views on economy -source
By Tetsushi Kajimoto and Leika Kihara
TOKYO, Oct 29 (Reuters) - Japan's government kept up pressure on the central bank to continue helping the economy on the eve of a policy meeting in which it may scale back emergency corporate funding launched at the height of the financial crisis.
Government officials have warned against a premature end to corporate life support, but the Bank of Japan is leaning towards ending some schemes, such as buying corporate debt, in December, sources with knowledge of the bank's thinking have said.
But a plan for the central bank and the government to start monthly talks to discuss the economy suggested officials sought to avoid an open confrontation over policy.
Deputy Finance Minister Yoshihiko Noda, speaking to Reuters on Thursday, would not comment directly on any of the central bank's programmes but said monetary policy should continue to focus on helping the economy.
Finance Minister Hirohisa Fujii criticised the central bank earlier this week for what he said was a too rosy view of the world's second-biggest economy.
"It is still important for the BOJ to support the economy on the monetary front," said Noda, who will attend the central bank's meeting on Friday as one of the government's two representatives.
"I hope the government and the BOJ share a common understanding to respond (to economic conditions) while keeping in close contact."
Government representatives have no vote but can express opinions and request delays in voting, although the bank has the right to reject such requests.
Japan pulled out of its longest recession since World War Two in the second quarter, but the new government, which swept to power in an August election with pledges to steer the economy towards consumers and away from export markets, is worried whether the upturn can last.
Noda would not say how the government would react if the central bank decided to withdraw its funding lifeline for firms, but echoed Fujii's concerns about the strength of the economy.
The central bank argues that credit markets have largely recovered from the shock of the global crisis and emergency programmes are no longer necessary, whereas the government says money remains tight for smaller companies that are the backbone of the economy.
The Bank of Japan's independence is guaranteed by law and its officials would never admit that government pressure could influence its policy decisions. But people familiar with its thinking told Reuters the central bank was keen to avoid a confrontation with the new administration and to find common ground on the economy.
They also said the government's criticism of the central bank's assessment of the economy did not go unnoticed.
"What policymakers say won't affect the BOJ's decisions," a source with direct knowledge of the BOJ's thinking said.
"But the bank always takes into account various factors and the view of policymakers shouldn't be ignored."
In fact, according to sources familiar with the matter, the central bank and the government have agreed to hold monthly meetings to discuss the economy, with the first expected early next month ahead of the bank's Nov. 19-20 monetary policy review.
The talks would steer clear of details of monetary policy to respect the bank's independence, the Nikkei business daily reported.
At present, the only regular government meeting the BOJ governor attends is a monthly gathering of economic ministers, held to approve the government's monthly economic report.
In a sign that the central bank was willing to accommodate some of the government's concerns, while avoiding giving and impression that it was caving in to pressure, Governor Masaaki Shirakawa earlier this month described ending funding schemes as mainly a technical matter.
At the same time he promised the central bank would keep interest rates very low to broadly support the economy.
Central bank officials say the BOJ is not thinking about increasing bond purchases or further easing monetary policy in any way, but economists say the prospect of protracted deflation and renewed doubts about the strength of the global economic recovery may force the BOJ to reconsider.
"I'm not sure how the BOJ would justify not doing anything beyond keeping rates near zero when it's predicting three years of deflation," said Hirokata Kusaba, a senior economist at Mizuho Research Institute.
The BOJ is already forecasting two years of deflation and is likely to extend that to three years when it issues its twice-yearly economic outlook report on Friday. (Additional reporting by Yuko Yoshikawa and Hideyuki Sano; Writing by Tomasz Janowski; Editing by Michael Watson)