TOKYO, April 5 (Reuters) - The Bank of Japan (BOJ) has two vacancies on its policy board after the opposition-controlled upper house of parliament turned down on Thursday a government nominee who legislators argued would not be aggressive enough about easing monetary policy.
The rejection signals the central bank will remain under pressure from members of parliament who want further monetary stimulus or a higher inflation target to pull Japan out of deflation.
"This showed that politicians won't tolerate anyone reluctant toward monetary easing," said Seiji Adachi, senior economist at Deutsche Securities in Tokyo.
The upper house voted down the government's proposal for Ryutaro Kono, chief economist at BNP Paribas in Tokyo and a respected central bank watcher, to fill one of two openings on the bank's nine-member board.
A nomination needs the approval of both houses of parliament to take effect. The rejection means the government needs to find a new candidate but it has no clear time frame for that, or when it will submit a nomination for the other board vacancy.
The bank will have to hold its policy meeting next week with the two vacancies.
Analysts say that while the vacancies will not have an immediate effect on policy, it leaves the bank vulnerable to political meddling and may affect the selection of its governor and deputy governors when their terms expire early next year.
"There's a bigger chance the BOJ will lean even more towards further easing," said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance in Tokyo.
"It's too early to talk about the next governor and deputy governors. But if the political situation stays the same, those eager about easing will probably be selected."
Under pressure to take bolder steps to pull Japan out of deflation, the bank surprised markets in February by boosting asset purchases and setting a 1 percent inflation target.
The government led by Prime Minister Yoshihiko Noda has welcomed the move but has signalled it wants further steps if necessary to nudge up consumer prices. Annual inflation is still barely above zero.
Opposition parties turned down the proposal for Kono - a well respected BOJ watcher - arguing that his views were too close to that of the central bank, and that the opening should be filled by someone more in favour of aggressive steps.
That means the government may try to find candidates who support aggressive easing or at least those who would not object to bold steps.
"Kono was regarded as being tilted toward fiscal discipline. We will need to pick someone who has his or her own views and not easily influenced by BOJ bureaucrats' thinking," ruling party member of parliament Kohei Otsuka told Reuters.
While Noda is understanding of the need to respect the bank's independence, he cannot turn a blind eye to demands from even within his own party for more stimulus to keep the economy afloat as he tries to muscle through much-needed tax increases to fix tattered finances.
Yoshimasa Hayashi, a heavyweight member of parliament from Japan's biggest opposition Liberal Democratic Party, told Reuters his party wanted the central bank to target 2 percent inflation rather than the 1 percent set in February.
"Kono didn't seem to be someone who would call for a higher inflation goal," he said. "We would support someone who thinks there is room to doing more in monetary policy and who has done research on monetary policy."
The central bank is likely to keep monetary policy steady next week but may ponder action at another rate review on April 27, when it issues new long-term economic and price forecasts.
The government needs to fill two vacancies at the BOJ after the five-year terms of Hidetoshi Kamezaki and Seiji Nakamura, both former business executives, expired on April 4. Both Kamezaki and Nakamura have mostly voted with the majority and toed the bank's line.