UPDATE 1-Norway wealth fund rejects govt control plan

* Tighter regulation sought after financial crisis debacle

* Says proposed guidelines too rigid, blur responsibility

* Govt says to finalise new rules by January 2010

(Adds government reaction)

By Terje Solsvik

OSLO, Oct 22 (Reuters) - Norway's $458 billion wealth fund rejected on Thursday proposals increasing government say over its investments in the wake of huge losses suffered by Europe's largest equity investor during the financial crisis.

The central bank-run fund said in a letter to the Norwegian government that the proposed changes were too detailed, could lead to bad decision making, blur the lines of responsibility and even trigger a massive erosion of asset value.

The finance ministry made its proposals in August, suggesting "more parameters" and measures to control risk taking at the fund, including stricter limits on leverage, short-selling and several other forms of transactions.

"In some areas the ministry goes too far in proposing detailed regulations," the central bank said in its reply to the ministry's policy proposals, published on its website.