* No FX intervention unless moves abnormal-opposition adviser
* No need to change FX reserves policy even if change of govt
* Would cut 2009/10 extra budget spending to reduce govt debt (Adds more quotes, details)
By Tetsushi Kajimoto and Sumio Ito
TOKYO, July 16 (Reuters) - Japan should not intervene in the foreign exchange markets unless currency rates fluctuate abnormally, a senior opposition lawmaker said on Thursday, when asked about the yen's recent strength against the dollar.
The main opposition Democratic Party has its best ever chance of beating Prime Minister Taro Aso's ruling Liberal Democratic Party (LDP) and its junior coalition partner in a looming national election, ending half a century of nearly unbroken rule by the conservative LDP.
For a graphic tracking Japanese voter intentions, click: http://graphics.thomsonreuters.com/059/JP_VTRS0509.jpg
"Currency rates should not be moved artificially as they reflect the economy's strength. If Japan's economy is strong, so is the yen and if it's weaker than the U.S. economy, the dollar will strengthen. It's quite natural," Hirohisa Fujii, a top adviser for the Democrats, told Reuters in an interview.
"Unless currency moves are abnormal, I don't think we should intervene in currency markets."
Fujii, a 77-year-old former finance ministry official, is seen by political analysts and party members as a candidate for a key post on economic policy if the Democrats win the election that must be held by October.
He served as finance minister in an anti-LDP coalition from 1993 to 1994.
It is not clear whom a Democratic Party government would appoint as finance minister. Masaharu Nakagawa, the party's finance spokesman, and Fujii are touted as possible candidates, though analysts say the post could go to other policy veterans.
Japan has a long history of trying to stem yen strength by intervening to buy dollars, but it has stayed out of the market since a 35 trillion yen ($373 billion) campaign over 15 months ended in March 2004.
The yen touched a five-month peak of 91.80 yen to the dollar last week, raising concerns over the impact on Japan's export-reliant economy as it emerges from its deepest recession since World War Two.
Fujii said the Democrats also see no need to alter Japan's dollar holdings in its $1 trillion foreign exchange reserves, the world's second biggest after China.
"It is a fact that confidence in the dollar is still high and it is quite natural for Japan to manage its reserves with what is trusted most (by the markets)," he said.
"The same goes with currencies and shares, and we should acknowledge them as a fact in a free market economy."
Fujii shrugged off remarks by Nakagawa, who said Japan should avoid buying dollar-denominated U.S. government bonds because of currency risk.
"About 60-70 percent of the way things are run should not be changed, that's a condition for a change of government. If it's changed 100 percent, that would be a revolution," Fujii said.
"The weighting of the dollar in the reserves is one such issue that should not be changed just because a change of government happens."
He also said the Democrats would cut what they consider wasteful spending in Tokyo's $160 billion stimulus steps, which he said includes such spending as on construction projects, to reduce new bond issuance totalling a record 44.1 trillion yen in the fiscal year that started on April 1.
"The extra budget (for the current fiscal year to next March) is a fake," Fujii said. "It is important to cut more than 10 percent of new government bond issuance. This is important for both Japan's fiscal health and JGB markets." ($1=93.74 Yen) (Editing by Chris Gallagher) (For more stories on Japanese politics click on)