* Spending overhaul must come before debt cap - DPJ official
* Takashima says ready to review DPJ's spending programmes (Adds quotes, details)
By Tetsushi Kajimoto and Yuko Yoshikawa
TOKYO, May 11 (Reuters) - Japan's ruling Democratic Party does not back the finance minister's call for a cap on bond issuance for next fiscal year, a senior party lawmaker said on Tuesday, as the Greek debt crisis puts pressure on Japan to fix its tattered finances.
Yoshimitsu Takashima, the party's deputy secretary general, also said the government did not need to submit to parliament a bill to restore fiscal discipline, despite the finance minister's desire to do so.
Japan must instead overhaul its spending plans so that money spent wastefully on public works projects is diverted to programmes aimed at supporting households, said Takashima, who is tasked with drafting the party's campaign platform for an upper house election expected in July.
"Without making such efforts, we cannot gain people's understanding for setting a cap on bond issuance and seeking future tax hikes," he said in an interview with Reuters.
Finance Minister Naoto Kan said on Tuesday that Japan would try to ensure that next fiscal year's new bond issuance does not exceed this year's record 44.3 trillion yen ($474.7 billion).
But Takashima said the party did not share Kan's view.
"I think that was his personal view," Takashima said. "I guess he wanted to raise the alarm that Japan could face such a situation as Greece does in the future."
Many government and ruling party officials are cautious about any talk of a tax hike or a less expansionary fiscal policy for fear of alienating voters ahead of the upper house election.
SUPPORT FALLING
Public support for Prime Minister Yukio Hatoyama's government has been crumbling as he dithered over the relocation of a U.S. Marine base on the southern island of Okinawa, casting doubt on his leadership.
Takashima said the party was ready to review its ambitious spending programmes when it finalises its campaign platform by the end of this month, given Japan's severe fiscal situation.
The Democratic Party-led government's big spending programmes have drawn warnings from ratings agencies. Japan's public debt ratio, at nearly twice the size of its gross domestic product, is the highest among G7 nations.
On monetary policy, Takashima said he wanted the Bank of Japan to help in beating deflation and achieving inflation of around 1 to 2 percent, roughly in line with the central bank's definition of long-term price stability.
But he said his party should not include in its campaign platform a demand for the BOJ to set a rigid inflation target, as it would not do much good to the economy.
The BOJ instead should do more to support industries with growth potential such as environment, health care, tourism and technology, Takashima said, welcoming the central bank's decision last month to consider setting up a framework for this purpose.
"The BOJ is supposed to act on neutral ground with the administration. But it should also consider ways to support government's economic policy at times," he said.
The BOJ said last month it would consider ways to support private financial institutions that lend to industries with growth potential. While details are yet to be decided, the bank is expected to offer low-interest loans to private banks that lend to such industries. (Editing by Kevin Liffey)