UPDATE 4-Japan PM wants to keep Ozawa as vote strategist

(For more on Japanese politics, click on ID:nPOLJP])

* Former Ozawa aide will be charged on Thursday-media

* Ruling party kingpin seen as master campaign strategist

* Party needs majority in mid-year election to pass bills
(Adds comment by senior ruling party lawmaker, paragraphs
9-10)

By Isabel Reynolds

TOKYO, Feb 2 (BestGrowthStock) – Japanese Prime Minister Yukio
Hatoyama stood by his ruling Democratic Party’s No. 2 on
Tuesday despite a funding scandal that is undermining the
party’s chances in a key mid-year election, threatening policy
paralysis.

A former aide to Ichiro Ozawa will be charged over the
affair on Thursday, media reports say, adding to pressure on
the party kingpin to resign from his post as its
secretary-general ahead of an upper house election expected in
July.

But Ozawa’s skills as a campaign strategist would be
valuable in the election, in which the party needs to win a
majority to enable it to pass bills smoothly without relying on
an awkward coalition with two tiny parties.

“Looking at his work up to now, of course, I want him to be
in control for the election,” Hatoyama told reporters.
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^ For a graphic on voter support, see
http://r.reuters.com/myv63g
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^ A ruling bloc election loss could lead to policy
paralysis just as Japan struggles to keep an economic recovery
on track without increasing its huge public debt, while also
facing problems stemming from a rapidly ageing population.

The economy is emerging from its worst recession since
World War Two but remains plagued by deflation, as evidenced by
a record fall in consumer prices excluding food and energy in
December. [ID:nLDE60S01Y]

The Democrats will need to weigh Ozawa’s talents against a
fall in voter support for the young administration triggered in
part by the scandal ensnaring three current and former aides.

PARTY PRESSURE

A newspaper survey published on Monday showed that more
than three-quarters of voters thought Ozawa should step down if
former aide Tomohiro Ishikawa was indicted.

Ozawa, 67, denied on Monday having taken any illegal
contributions or bribes, but hinted he might resign if he
himself came under suspicion of criminal activity.

Speculation simmered that Ozawa might be charged as early
as Thursday with violating a law on political funding. “There
is a 50 percent chance,” said political analyst Hirotaka
Futatsuki.

Some analysts said Ozawa might try to stay in his post but
would face increasing pressure from within his party to quit.

“The problem is that anti-Ozawa opinion is rising within
the party,” said political analyst Harumi Arima.

“People are worried they might end up with parliamentary
gridlock like the Liberal Democratic Party (LDP) did.”

Senior Democratic Party lawmaker Kozo Watanabe told
reporters it would be “natural” for Ozawa to resign his party
post if he were charged. Depending on the circumstances, he
might have to give up his seat in parliament too, Jiji news
agency reported.

The long-ruling LDP, defeated by the Democrats in a general
election for the more powerful lower house last August, had
struggled for more than two years with an upper house dominated
by opposition parties, which delayed legislation.
(For a newsmaker on Ichiro Ozawa, click on [ID:nTOE60F01D])

Investing Analysis

(Additional reporting by Linda Sieg; Editing by Paul Tait)

UPDATE 4-Japan PM wants to keep Ozawa as vote strategist