Japan needs robust finance industry -new FSA boss

* New FSA boss says finance industry must be stronger

* Says will work to improve Tokyo as global financial centre

* Says no decision on extending short-selling freeze

By David Dolan

TOKYO, July 14 (Reuters) - Japan needs a more robust financial services industry to help boost the world's second-largest economy, the new head of the financial regulator said on Tuesday.

Katsunori Mikuniya, a 58-year-old veteran bureaucrat with a reputation for expertise in capital markets, also said he would work to improve Tokyo's standing as a global financial centre.

"The population is set to age and shrink further," Mikuniya said at his first news conference as commissioner of the Financial Services Agency (FSA).

"A virtuous circle needs to be in place between the role of the financial sector in supporting the real economy and finance as a viable industry."

Mikuniya, previously head of the FSA's supervisory division, replaces Takafumi Sato, who served in the position for two years.

He takes the helm of the regulator as Japanese financial firms grapple with a sliding domestic economy and hefty losses.

Japan's top three banks lost a total of 1.2 trillion yen in the year to March, hit by rising bad loan costs and a sharp fall in their stock portfolios.

"The economy is in bad shape right now and the markets may not recover unless someone carries out reform," said Seishi Ikeda, a lawyer specialising in capital markets at Baker & McKenzie in Tokyo. "I would expect Mr. Mikuniya to work on steps that would help invigorate the markets."

TOKYO CALLING

The FSA is also desperate to improve Tokyo's position as a financial centre, which has been overshadowed in recent years by Hong Kong and Singapore, which boast lower taxes and lighter regulation.