Japan's opposition still opposes Muto as BOJ chief

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By Yoko Nishikawa

TOKYO, March 9 (Reuters) - Japan's main opposition Democratic Party, which has the power to block the nomination of a new Bank of Japan chief in parliament, said on Sunday it still opposed the government's nominee, current deputy governor Toshiro Muto.

A political wrangle over the nomination has dented the government's credibility and raised concern about a policy vacuum -- at a time of global market turmoil and fears of a recession in Japan -- once Governor Toshihiko Fukui retires on March 19.

Resistance to Muto centres on the fact that he was previously a vice finance minister at the Ministry of Finance (MOF), a top bureaucratic position. Some opposition lawmakers say appointing such a person would undermine the central bank's independence.

"We are not saying all the former finance ministry officials are unsuitable. But Muto is like Mr. MOF, who served as a vice finance minister for 2-½ years," Democratic Party executive Naoto Kan said on NHK television.

"We have been calling for separation between fiscal and monetary policy and we did not support him when he was nominated for deputy governor. That stance remains basically unchanged," he added.

Kan, one of several top party officials who will probably decide the Democrats' vote along with party leader Ichiro Ozawa, said the party's final decision would be made after parliamentary hearings to question Muto on Tuesday.

But he added: "Unless (hearings) contain new things that require us to change our minds drastically, our basic stance will remain unchanged."