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JACKSON HOLE, Wyoming Reuters Tax and budget policies need the same regularity and independence as monetary policy if countries around the world are to cope with looming stresses from pension programs, world central bankers were told at a Federal Reserve conference on Saturday.

"Modern monetary research and practical policy-making are united in aiming to make monetary policy scientific," said Indiana University Economics Professor Eric Leeper in a paper. "No analogous transformation has occurred with macro fiscal policy."

Leeper presented his paper at an annual conference held by the U.S. Federal Reserve in Jackson Hole, Wyoming.

His view will have resonance for policy-makers who in many countries have already cut interest rates to historically low levels and launched extensive asset purchase programs to stimulate growth. With prospects for new fiscal stimulus programs politically unpopular, central bankers are considering additional measures to ease financial conditions to support flagging recoveries in many countries represented at the conference.

In addition, U.S. politicians have for many years debated without resolution whether to raise taxes or cut benefits to the Social Security and Medicare retiree pension and health care programs, which face stiff financial challenges as the baby boom generation retires.

Fiscal policy can have as strong an effect on economic activity and inflation as monetary policy decisions, Leeper said.

Central bankers are likely to have to pay more attention to taxation and budgeting in the future as the stresses from the financial obligations of retirement programs increase, he said.

Since there is general agreement that central bank decisions should be made without political meddling, financial markets can be reasonably confident of policy makers responses to a slowdown in economic growth or a rise in inflation, Leeper said.

However, no such predictability exists for fiscal policy, which can shift with political winds.

"There is a fairly clear consensus on the objectives of monetary policy, but none for fiscal policy," Leeper wrote.

"Governments devote shockingly few resources into understanding fiscal policys impacts," he wrote.

He urged central bankers to be more outspoken on fiscal issues, reversing their preference for wading into politically sensitive areas.

"Central bankers have a role to play ... They can break away from the taboo against saying anything substantive on fiscal policy," he wrote.

Reporting by Mark Felsenthal; Editing by Leslie Adler

BEIJING Reuters Japanese Finance Minister Yoshihiko Noda said on Saturday he was ready to employ "all possible measures" to tackle the soaring yen, which was having a big impact on the countrys export-led economy.

Speaking in Chinas capital, Noda told reporters he wanted the Bank of Japan to guide policy while sharing its views on the economy with the government.

He also said there was room for Japans central bank to improve the monetary situation, but it was up to the bank to consider specific policy steps.

The yen hit a 15-year high against the dollar this week, and Tokyo is scrambling to craft a package of steps to prop up its stuttering economy while keeping up pressure on the BOJ to do more to pull the country out of deflation.

The yen, which surged to 83.58 per dollar on Tuesday, was hovering just above 85 on Saturday.

"Many people are worried and the government is taking a serious view, and we must adopt all possible measures," Noda said, after meeting Chinese Finance Minister Xie Xuren on the sidelines of a Japan-China economic dialogue.

Noda urged China to make its yuan currency more flexible and said Japan would announce its basic policy on an economic package next week.

"We will take decisive measures when necessary while watching market trends with great interest," Noda said, echoing comments the previous day from Prime Minister Naoto Kan that signaled possible currency intervention.

Noda also said he expected Kan to meet BOJ Governor Masaaki Shirakawa as soon as possible after the central bank chief returns from the United States on Monday.

The BOJ may hold an emergency meeting early next week to ease monetary policy, a source familiar with the matter said [ID:nSGE67Q0J1]

China, meanwhile, should continue making "steady efforts" to make its currency more flexible, Noda told reporters. The yuan has appreciated about 0.4 percent against the dollar since it was lifted from a nearly two-year peg on June 19.

Japan has not intervened in the currency market since March 2004, when a 15-month yen-selling spree came to an end. During that period, they sold 35 trillion yen $410 billion, the equivalent of more than one-third of the annual budget.

Despite the risk of possible action by Japanese authorities to curb yen strength, such as currency intervention or monetary easing, some traders and investors say the yen could still test a record high of 79.75 yen to the dollar, hit in April 1995.

$1=85.37 Yen

Reporting by Tetsushi Kajimoto; Editing by Nick Macfie, Ken Wills, John Stonestreet

NEW YORK Reuters Beaten-up investors go into September, historically a weak month for stocks, facing key reports on jobs, manufacturing and services. If those disappoint, the S&P 500 could breach technical support levels, pushing stocks yet lower.

The S&P 500 index has fallen nearly 13 percent since April as investors fret about the chance of a double-dip recession. But the index has found solid support around the 1,040 level, with a sustained move below that proving tough.

Federal Reserve Chairman Ben Bernanke boosted stocks on Friday by signaling the Fed is ready to act if the economy worsens. But more weakness in upcoming indicators like non-farm payrolls and Institute for Supply Management surveys would intensify fears the economy is sliding back into recession.

"There is this continual trend toward numbers falling short of expectations," said Nick Kalivas, equity analyst at MF Global in Chicago. "My guess is youll see some selling come in again next week on these numbers."

The non-farm payroll report on Friday is expected to show 99,000 jobs were lost in August, swollen by redundancies among temporary census workers, while private sector hires grew by only 42,000.

Both the manufacturing and services sectors are expected to have experienced another slowdown in growth in August. The ISM manufacturing report is released on Wednesday, followed by the services sector report on Friday.

ATTRACTING BUYERS

The S&P 500 tested the 1,040 level twice during the week, both times ending the day with gains. The level has consistently attracted buyers over the past 10 months and was significantly breached only once during a brief stint in July.

"Here we are sitting at this important support level, having pulled back 8 percent on an intraday basis in three weeks, you potentially set up for a reversal," said Richard Ross, global technical strategist at Auerbach Grayson in New York.

The benchmark Standard & Poors 500 index finished this week at 1,064 on Friday. If the 1,040 level is breached, the S&P 500 could fall into a lower range around 1,020 to 1,010. However, the index runs into resistance at its 14-day moving average at 1,076.65, providing only limited scope on the upside.

Investor sentiment remains negative. In the options market, investors bought S&P 500 puts, giving them the right to sell S&P futures at a fixed price, although the most actively traded option on the S&P 500 SPY.P ETF was the $107 call, suggesting some bullish trades ahead of next week.

"Overall investor sentiment in the option market has become very skeptical, with put buying widely exceeding call purchases," said Ryan Detrick, technical senior analyst at Schaeffers Investment Research in Cincinnati.

The put-to-call ratio, a measure of investor sentiment, was at 0.61 as of Thursdays close compared to a 21-day ratio of 0.59.

Investors will be closely following comments from executives at big industrial companies like General Electric GE.N and Boeing BA.N at Morgan Stanleys Global Industrials Unplugged Conference next week.

MAJOR REVENUE ESTIMATES

Intel Corp INTC.O cut its third-quarter revenue estimates in a surprise on Friday. Although investors shook off the news after an initial fall, bleak outlooks from large corporation at the heart of the economy could rattle investors.

As usual there will be a series of secondary labor market data playing second fiddle ahead of the Fridays jobs number. ADPs jobs report on Wednesday is expected to show the private sector added 18,000 jobs in August, down from 42,000 in July.

Weekly claims for jobless benefits are tipped to remain solidly elevated on Thursday, edging up to 475,000 compared to 473,000 the week before.

With significant risks on the horizon, many investors may think twice about getting into the market at the start of September, historically the worst performing month for all three major indexes.

That may be especially true given the three day break the following week when U.S. markets shut to observe Labor Day on Monday, September 6.

Scott Marcouiller, chief technical market strategist at Wells Fargo Advisors in St. Louis, said he found it hard to envision a rally in the current environment.

"Right now the market is locked into short-term thinking," he said.

Reporting by Edward Krudy; Additional reporting by Rodrigo Campos and Leah Schnurr; Editing by Kenneth Barry