Hydroxylase that catalyzes the C3 regiospecific hydroxylation on the 5-methyl-1-naphthoate to 3-hydroxy-5-methyl-1-naphthoate in the biosynthesis of the antitumor antibiotic azinomycin B. 5-methyl-1-naphthoate + H(+) + NADPH + O2 = 3-hydroxy-5-methyl-1-naphthoate + H2O + NADP(+) kcat is 0.8 min(-1). Optimum pH is 9.0. Antibiotic biosynthesis. Belongs to the cytochrome P450 family.