By Tetsushi Kajimoto and Linda Sieg

TOKYO (Reuters) - The policy chief of Japan's ruling Liberal Democratic Party said on Wednesday that the government should act if the outcome of the British referendum next week causes excessive and disorderly moves in currency markets.

Tomomi Inada, who represents the party's stance on policy issues, echoed authorities' concerns about a potential spike in the yen, perceived as a safe-haven currency during times of heightened risk aversion, in the event of "Brexit".

Inada told Reuters in an interview that excess volatility in the yen is undesirable and that she hopes the government would respond in case of rapid and disorderly moves in currency markets. She did not elaborate.

A renewed spike in the yen is adding to headaches for Bank of Japan policymakers holding a rate review this week. Many of them still appear to prefer holding off on expanding stimulus, despite signs of weakening inflation.

Asked whether more stimulus is warranted, Inada said the decision was up to the BOJ and, in a nod to its steps so far, said the central bank's moves were producing steady results.

Inada, a close ally of Prime Minister Shinzo Abe, said the government's job was to implement structural reform in areas such as social security and employment without relying too much on monetary policy.


In its campaign platform for a July 10 upper house election, the LDP dropped any direct reference to aggressive monetary stimulus, sparking speculation that it might be distancing itself from the central bank after the BOJ's adoption of negative interest rates proved unpopular among banks.

But Inada shrugged off that view, saying BOJ stimulus continues to be a pillar of "Abenomics three arrows" of bold monetary policy, flexible fiscal spending and structural reform.

Abe's decision this month to delay again a planned sales tax hike by two and half years, to October 2019, amid economic weakness has raised doubts about Japan's commitment to fiscal discipline despite having the heaviest public debt burden among advanced nations.

According to Inada, the sales tax must rise in October 2019 for the government to achieve its goal of getting the primary budget balance - excluding new bond sales and debt servicing costs - into the black in fiscal 2020/21.

There was no need for the government to alter its roadmap to achieve the fiscal reform plan, she added.

Picked by Abe for one of the most crucial party posts, the 57-year-old lawyer-turned-politician is seen as a candidate to become Japan's first female prime minister.

(Additional reporting by Takashi Umekawa; Editing by Chris Gallagher and Richard Borsuk)