Japan PM's ex-aide charged over funds scandal

TOKYO (Reuters) - A former close aide to Japanese Prime Minister Yukio Hatoyama was charged on Thursday in connection with a funding scandal, but the premier is expected to ride out the affair ahead of an upper house election in mid-2010.

The aide, who was dismissed after the suspicions came to light, is suspected of having altered records to make cash funneled from Hatoyama's own family fortune look like donations from individuals.

Here are some implications of the indictment for Hatoyama:

* The indictment might not cause a quick, sharp drop in Hatoyama's voter support. Surveys have shown voters unhappy with Hatoyama's explanations of the affair but a majority said he need not resign, partly because the wealthy prime minister is not seen as having acted for personal gain. Aspects of the scandal were public knowledge before the August election that brought Hatoyama to power, but his Democratic Party still scored a huge win. And media reports have said prosecutors will not question Hatoyama himself about the scandal.

* Hatoyama is also under a cloud over a related scandal in which he received large amounts of cash from his wealthy mother, a daughter of the founder of tire maker Bridgestone Corp. The premier has said he knew nothing about it but also suggested he would pay gift taxes if prosecutors say he should.

* But depending on how media play the scandal and whether it widens, the affair could undermine Hatoyama's support among voters already worried about a perceived lack of leadership.

* A steep slide in ratings, which have fallen to as low as just below 50 percent from early highs of over 70 percent, could endanger Hatoyama's grip on his post ahead of the upper house election, in which his Democrats want to win an outright majority so they can stop relying on the support of two tiny coalition partners. If Hatoyama quits it would fuel investor worries about policy uncertainty in Japan, which has already had four prime ministers in three years.

* The opposition Liberal Democratic Party could badger Hatoyama on the scandal in parliament next year, taking time away from pressing matters such as the budget, although the LDP has funding scandals of its own, so its attack might lack punch.

(Editing by Michael Watson)