Japan PM ahead in party race, margin small: aide

By Linda Sieg

TOKYO (BestGrowthStock) – Japanese Prime Minister Naoto Kan has a slight lead over rival Ichiro Ozawa in a ruling party leadership race that has markets on tenterhooks, but his victory will be by a small margin, a key aide to Kan said on Tuesday.

The winner of the September 14 Democratic Party of Japan (DPJ) leadership vote will likely be premier by virtue of the party’s majority in parliament’s powerful lower house, taking the helm as Japan struggles with a strong yen, weak economy, huge public debt and a divided parliament.

Financial markets are bracing for a shift away from Kan’s efforts to rein in debt already twice the size of the $5 trillion economy if Ozawa wins, as media surveys suggest is possible.

Hajime Ishii, an upper house lawmaker and No. 2 in Kan’s campaign organization, said the prime minister and Ozawa were neck-and-neck among members of parliament (MPs) but that Kan was in the lead among local lawmakers and party members and supporters, whose votes carry less weight than those of the MPs.

“There is still a week left and until we see how the situation changes, we won’t know,” Ishii told Reuters in an interview. “It will be by a small margin.”

Ishii also said that parliamentary business would grind to a halt and a snap election called within the year if Ozawa won, since opposition parties would attack him over a funding scandal in which the veteran lawmaker faces possible indictment.

Political analysts and Japanese media say the race is too close to call, since Ozawa, 68, heads the party’s biggest parliamentary faction while Kan — who took office in June as Japan’s fifth premier in three years — has better ratings among the general public.

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Ozawa resigned as party leader over a funding scandal last year and quit as party No. 2 in June after his image as a backroom wheeler dealer contributed to a slide in voter support.

A judicial panel of ordinary citizens is expected to rule in coming months whether Ozawa must face indictment in the affair.

“If Ozawa wins, parliament will fall into confusion and there will immediately be a snap election because he has not cleared the issue of his money scandal,” Ishii said, adding that policy matters such as how to cope with the yen’s rise or the sales tax would all be sidelined.

Ishii also said Ozawa’s promise to fund party pledges made last year to put more money in consumers’ hands by cutting waste and reallocating spending would prove impossible to keep, but that issuing more government bonds to fill the gap would not be practical given the size of Japan’s existing public debt.

Kan has said he would try to keep the campaign pledges but seek public understanding if he cannot.

“He (Ozawa) is discussing funding sources in general terms, but …in practice, it would be quite difficult,” Ishii said. “The economy is not suddenly going to improve and tax revenues grow.”

Opinion polls consistently show that about two-thirds of voters prefer Kan over Ozawa as the nation’s leader, although Ozawa admirers say the veteran political strategist’s skills are precisely what’s needed to break through parliamentary stalemate.

“There is a gap between lawmakers’ views and public opinion. If we ignore that gap and select Mr. Ozawa, that would force a snap election and the Democratic Party cabinet would be blown away,” Ishii said.

The Democrats swept to power for the first time last year, promising change. But the party and a tiny coalition partner lost their majority in a July upper house election, in part because Kan suddenly floated the idea of a future rise in the 5 percent sales tax. That means they now need opposition help to enact legislation.

Ishii said the DPJ would not split regardless of who won the party vote, but stopped short of predicting whether Ozawa, long known for shaking up Japanese politics, would stay if he lost.

“Some might leave, but if it’s just several dozen lawmakers, there won’t be such a big impact,” he said. “I think that once the election is over the party will be able to unify.”

(Additional reporting by Yuko Yoshikawa; Editing by Edmund Klamann and Alex Richardson)

Japan PM ahead in party race, margin small: aide