TOKYO, March 13 (Reuters) - Mitsubishi UFJ Financial Group ( MUFG ) will closely monitor liquidity when issuing loans, an executive said, as Japanese banks prepare to potentially back projects under the country's $550 billion investment package in the United States.

Japanese financial institutions are expected to participate in the initiative alongside support from state-owned agencies Japan Bank for International Cooperation (JBIC) and Nippon Export and Investment Insurance (NEXI), which are providing equity, loans, and loan guarantees.

"We must be vigilant," Chief Financial Officer Jun Togawa told Reuters. "A sharp and sudden rise in long-term loans would be challenging from an NSFR perspective," Togawa said, referring to the Basel III Net Stable Funding Ratio.

Togawa declined to comment directly on Japan's U.S. investment commitments that are part of its trade agreement with Washington, signed last year.

The NSFR requires banks to maintain stable funding sources, such as capital or long-term liabilities, to offset illiquid or long-term assets, as part of international regulatory reforms developed after the 2008 financial crisis.

Several deals are being discussed and could be announced during Japanese Prime Minister Sanae Takaichi's upcoming visit to U.S. President Donald Trump, sources told Reuters last week.