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TOKYO, Nov 5 (Reuters) - Japan's Senior Vice Finance Minister Naoki Minezaki said on Thursday that the government should raise tax on vehicles that are particularly harmful to the environment.

"We would cut tax on cars that are ecologically good and levy heavier taxes on those that are bad for the environment," Minezaki told a news conference, referring to ongoing tax reform discussions.

On the outlook for the Japanese economy, Minezaki said that pulling out of deflation would be a "major challenge", after the Bank of Japan forecast three years of deflation through fiscal 2011/2012 in its semiannual outlook report last week.

"The government and the BOJ need a venue for holding talks and sharing common understanding," Minezaki added. The two are currently considering setting up regular meetings. (Reporting by Rie Ishiguro)