UPDATE 1-Japan will keep close communication with BOJ on forex, finance minister says

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TOKYO, May 14 (Reuters) - The Japanese government will closely work with the Bank of Japan on currency market matters to ensure there is no friction between their mutual policy objectives, finance minister Shunichi Suzuki said on Tuesday.

"We'll closely monitor the currency and take all possible measures," Suzuki said, adding it is important for the exchange rate to move in a stable manner reflecting fundamentals.

The finance minister played down the market's focus on a specific exchange rate level, giving little away about the suspected round of interventions by Tokyo when the yen slumped past 160-per-dollar late last month.

The yen has since bounced solidly and was last fetching around 156.40.

In a regular post-cabinet meeting press conference, Suzuki said the government is also watching interest rate movements closely. His comments were made in response to a query on the BOJ's unexpected reduction in the amount of Japanese government bonds it offered to buy in a regular purchase operation on Monday.

From a general standpoint, it is also important to take action to "smooth out" excessive fluctuations in the foreign exchange market, the finance minister said. (Reporting by Satoshi Sugiyama; Editing by Christopher Cushing and Shri Navaratnam)