* May consider quitting coalition if disagrees with partners
* Not considering such a move now
* Government stimulus needed to fight deflation (Adds quotes, background)
By David Schlesinger and David Dolan
TOKYO, Dec 16 (Reuters) - Shizuka Kamei, the head of a party key to Japan's ruling coalition, called on Wednesday for more stimulus spending to boost the economy but said there was little chance of him leaving the coalition over disagreements.
Kamei, banking minister and head of the small People's New Party, also told Reuters in an interview that action by the Bank of Japan alone was not enough to beat deflation in the world's second-largest economy.
A former police official known for his populist views and combative comments, Kamei pushed for more spending in an economic stimulus package unveiled on Tuesday but in the end the package was just slightly boosted, due to worries about Japan's bulging public debt.
"Japan's economy is now in a severe situation. Monetary easing is important but we also need fiscal stimulus to boost domestic demand. We need to have both in order for Japan to overcome deflation," Kamei said in an interview at his office in Tokyo.
"If policies were in disagreement with those of the People's New Party, we would leave the coalition ... But the People's New Party is completely taking the lead on policy in Japanese politics."
Prime Minister Yukio Hatoyama's Democratic Party has a huge majority in parliament's powerful lower house but needs the support of Kamei's PNP and another small ally to enact laws smoothly because it lacks a majority in the upper chamber.
Kamei, 73, has used that influence to push his populist agenda, calling for a moratorium on the repayment of bank loans to help debt-choked small companies and investors, accusing the Bank of Japan of being "asleep at the wheel" and advocating more spending.
DEFENDER OF UNDERDOGS
A native of Hiroshima whose older sister died in the atomic bombing of the city in World War Two, Kamei has made a career casting himself as an outspoken defender of underdogs, a stance that appeals to voters concerned that Japanese society is becoming too market-oriented and too competitive.
"Kamei is certainly exerting more influence than his small party warrants," said Hiroshi Hirano, professor of political science at Gakushuin University.
Yet the political results are often much more tame. His debt moratorium bill, which initially spooked investors and sent shares of banks sharply lower, was eventually passed in a much tamer version that had little impact on the market.
Kamei, who is also in charge of Japan's sprawling postal system, told Reuters he is considering allowing the savings arm of the post office to invest overseas.
One of the world's largest deposit-taking institutions, Japan Post currently has about 80 percent of its investments tied up in low-yielding Japanese government bonds.
"Currently I want to funnel some of the funds to local economies in Japan and I also want to think about how we can use the money to contribute to the world economy."
He declined to name what kind of investments he was currently considering.
A veteran lawmaker who began his career in the long-dominant Liberal Democratic Party, Kamei hails from a wing of the conservative party that is hawkish on security but paternalistic about the role of the government in the economy.
He often illustrates his points with colourful statements that grab attention but can also jar.
He has described the birth of Barack Obama as occurring on a "day blessed by God" and likened government to a parent who must provide food for its "crying children".
Hirano said despite his loud demands, Kamei would not quit the coalition if he failed to get what he wanted.
"His party's popularity is on the decline and he's not going to quit the coalition just because Hatoyama doesn't listen to his demands." ($1=89.56 Yen) (Additional reporting by Noriyuki Hirata, Leika Kihara and Chisa Fujioka; Editing by Rodney Joyce and Michael Watson)