Japan close to ending deadlock over BOJ governor

(For more on the BOJ succession, click [ID:nT55777])

By Yoko Nishikawa

TOKYO, April 8 (Reuters) - Japan neared an end on Tuesday to a stalemate over who should head the country's central bank, with analysts expecting a smooth ride through parliament for the government's third pick for governor, Masaaki Shirakawa.

Shirakawa, a deputy governor currently acting head of the Bank of Japan, will face hearings in parliament from 11 a.m. (0200 GMT).

Later in the day opposition parties, who control parliament's upper house and can veto his appointment, will give their verdict ahead of a vote on Wednesday.

Japan is desperate to resolve the leadership row, which has left the central bank without a permanent head for the first time in 80 years, in time for Shirakawa to fly to a G7 finance leaders meeting on Friday in Washington that will tackle fragile global markets amid fears of a U.S. recession.

Shirakawa is a suitable replacement for previous governor Toshihiko Fukui, who retired last month, Finance Minister Fukushiro Nukaga said.

"As acting governor, Mr. Shirakawa has effectively handled work as governor taking over from Mr. Fukui. He has deep knowledge and long experience of handling monetary policy," he told reporters after a cabinet meeting.

The main opposition Democratic Party and its smaller allies are likely to support Shirakawa because they approved his appointment as deputy governor last month.

Financial markets are more focused on the U.S. economic problems but see Shirakawa as a realistic choice after the three-week gap at the top of the BOJ. "The fact that Shirakawa seems pretty certain to be approved will provide relief to the Japanese government bond market, but I don't think there will be any market impact in the short term," said Takeo Okuhara, a bond strategist at Daiwa Institute of Research.

But the political standoff between the government and opposition parties over the BOJ leadership may linger, after the government nominated as deputy governor a former finance ministry official, Hiroshi Watanabe.

FINANCE MINISTRY UNWANTED

Opposition parties have already vetoed two former finance ministry bureaucrats for BOJ chief positions on grounds that their careers in the finance ministry could threaten the BOJ's independence in monetary policy.

"The BOJ law says the BOJ's policy should be in line with the government's basic economic policy stance. So in general, it is favourable to have someone from the finance ministry to ensure coordination between monetary and fiscal policy," the government's top spokesman Nobutaka Machimura said.

Watanabe would bring expertise in international monetary and financial issues to the BOJ leadership, given his experience as a former vice finance minister for international affairs, Machimura said.

The likely easing of the stalemate comes as the Bank of Japan starts a two-day BOJ policy meeting on Tuesday afternoon.