OECD chief: no reform in sight on Japan public debt

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TOKYO, Nov 18 (Reuters) - There is no end in sight to Japan's ballooning public debt with the country having put off targets for reforming its fiscal conditions, the head of the OECD said on Wednesday

"With the annual budget deficit approaching 10 percent of GDP, public debt is on track to rise even further to over 200 percent by 2011," Angel Gurria, secretary general of the Organisation for Economic Cooperation and Development, told a forum in Tokyo.

He voiced concern that Japan has pushed back its goal of bringing the primary balance deficit -- the budget deficit outside debt issuance and services -- into the black by 2011.

"Actually, it's not quite clear when that moment of inflection could happen," he said. With Japan's public debt already the highest in the developed world "any small increase in the nominal level of rates (of public debt to GDP) will be extremely difficult to handle in the budgets".

Concerns about further bond issuance sent bond yields soaring this month just as the new government, in office since mid-September, mulls an extra budget to stimulate the economy despite falling tax revenues.

"A key to solving the fiscal problem "is economic growth -- increasing GDP, in part by ending deflation," Gurria said.

He said Japan will likely overcome deflation given recent signs of a pickup in consumption.

"This is not a structural type of deflation that comes from a very sustained drop in demand," Gurria said.

"Growing 4.8 pct annually requires all engines to be working," he said, referring to the annualised growth figure for the third quarter released early this week.

Gurria stopped short of giving tips on monetary policy, saying that with policy rates already close to zero "that makes it very difficult for policies actually to move". (Reporting by Rie Ishiguro; Editing by Michael Watson)