The International Monetary Fund's financial counselor said on Wednesday the Fund was encouraged with steps by the Spanish government to reduce its budget deficit.

He added that whether Spain should apply for an international bailout was up to Madrid.

"This is a very delicate question," Jose Vinals, director of the IMF's monetary and capital markets department, said when asked whether Spain would tap the European central bank's bond-buying program.

"Whether Spain will request activation of the (Outright Monetary Transactions) program is something that is up to the Spanish authorities. We are encouraged in any case that Spain is taking important policy decisions," Vinals told Reuters in Tokyo.

He said addressing Spain's problems was challenging given the country's slow economic growth.

"I think Spain is doing important things and whether this should be supported also by the activation of the ECB's OMT mechanism is something up to the Spanish authorities," said Vinals, a former Bank of Spain official.

Earlier, he told Spanish radio that the IMF would welcome a decision if it were made.

"The government will have to decide whether to request the ECB's mechanism. It's up to the government and we would welcome any decision to take it. If not, we understand they must have their reasons," he told radio Cadena Ser.

(Reporting by Lesley Wroughton in Tokyo; Jes��s Aguado in Madrid; Editing by Tracy Rucinski/Jeremy Gaunt)