* Prime Minister Kan's vague promise to resign stirs political turmoil
* Political parties in war of nerves over passing legislation
* Political confusion casts cloud over recovery from natural disaster (Updates with parliament extension)
By Stanley White
TOKYO, June 22 (Reuters) - Japan extend ed on Wednesday parliament's session to the end of August to pass legislation as it strives to recover from an earthquake, tsunami and nuclear crisis, but there was no guarantee the opposition would cooperate while the unpopular premier clings to his post.
The political stalemate over Prime Minister Naoto Kan's departure risks slowing efforts to recover from the disaster and delaying vital policies, including a law to sell bonds to cover a budget deficit, changes to the social security system and tax increases needed to curb huge public debt.
"If Kan is saying he will quit, he should do so. The Democrats can then elect a new leader and open an emergency parliament session," Nobuteru Ishihara, secretary-general of the main opposition Liberal Democratic Party (LDP), told reporters after meeting counterparts from other parties.
Kan, under fire for his response to the March 11 earthquake and tsunami disaster, pledged this month to step down to quell a rebellion in his Democratic Party of Japan (DPJ) and survive a no-confidence vote, but the premier -- Japan's fifth leader in five years -- has declined to say when he will go.
The ambiguity has angered opposition parties, whose backing is needed to pass bills in a divided parliament, as well as Kan's critics in his own party, who are dragging their feet over proposals to double a 5 percent sales tax to fund rising social security costs and tackle public debt.
Kan has seen his support inside the DPJ dwindle while opposition efforts to oust him grow, not only because he has flip flopped on policies but also because of what even close aides term an abrasive personality.
The Democrats can extend parliament's session, due to end on Wednesday, without opposition parties agreeing, since they control parliament's more powerful lower house. But that could make the opposition even less likely to cooperate on legislation, which they can block in the upper house.
TAX, ENERGY REFORM
Japanese media said Kan, 64, wanted to stay on at least long enough to enact a bill enabling the government to issue bonds to fund about 40 percent of a ${esc.dollar}1 trillion budget for the fiscal year that started on April 1, a small extra budget to help with recovery from the tsunami and measures to promote renewable energy sources in the wake of the nuclear crisis.
A third extra budget, expected to top 10 trillion yen (${esc.dollar}125 billion), will likely be submitted to parliament in late August or early September, media said.
Ishihara reiterated on Wednesday his party's demands that the Democrats give up some spending plans and increase the burden the government bears for the pension scheme in exchange for passing the deficit bond bill.
Failure to do so would shut down the government, which is a risk that even the LDP may seek to avoid in the end.
"They have to pass the bond issuance bill by the end of August. That is the general mood," said Tomoaki Iwai, a professor of political science at Nihon University, adding that the small second extra budget would also be enacted.
But the outlook is dim for changes to social security and the sales tax rise, Iwai and other analysts said, given stiff opposition from lawmakers afraid of alienating voters.
The fate of the renewable energy bill is also murky, given opposition from the biggest business lobby, which fears higher electricity costs.
Kan, who has promised to more than double the percentage of electricity from renewable sources such as solar and wind power to more than 20 percent of total supply by the 2020s, wants to introduce a feed-in-tariff scheme obliging utilities to buy electricity from all types of renewable sources.
Proponents say the scheme is vital to expanding renewable energy. It would also allow utilities to pass on extra costs, which is irking both the opposition and his DPJ critics.
"The biggest reason for the political confusion is that the prime minister, who has said he will step down, is bringing up new policy issues and merely trying to extend his political life," said a commentary in the Nikkei business daily.
A 70-day extension would allow enough time for the ruling bloc to try to enact bills rejected by the upper house, which is controlled by the opposition, by overriding the chamber with a two-thirds majority in the lower house.
Even so, the DPJ would need backing from some opposition members since the party lacks a two-thirds majority in the lower house. (${esc.dollar}1 = 80.270 yen) (Additional reporting by Linda Sieg; Editing by Robert Birsel)
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