Japan Ozawa's fund group searched, adds to PM woes

Japan's ruling Democratic Party Secretary-General Ichiro Ozawa is pictured through a car window as he leaves a party in Nagoya, central Japan January 13, 2010.

TOKYO (Reuters) - Prosecutors searched the office of a funding group for the Japanese ruling party's No.2 official over a land purchase on Wednesday, media said, adding to the woes of the prime minister, whose own scandal has eroded support.

Media reports on the investigation into possible political funding irregularities linked to Democratic Party Secretary-General Ichiro Ozawa could eat into support for Prime Minister Yukio Hatoyama before a mid-year election for parliament's upper house.

Recent polls show support for Hatoyama's government, which took power after a landslide election victory for the Democrats last August, has leveled off at around 50 percent after initial highs above 70 percent.

Ozawa apologized on Tuesday for misunderstandings and trouble caused to the public by reports of the affair, but denied intentionally breaking any laws.

"As I have said many times, there may have been miscalculations by myself or those in my office, but I believe that there was no intentional violation of the law," Ozawa told a news conference.

Prosecutors had also searched offices of general contractor Kajima Corp, a Kajima spokesman said. He added that the company would cooperate fully with the investigation, but declined further comment.

Neither Ozawa nor his aides could be reached for comment on the searches.

Media reports say the money for the land purchase came from Ozawa and that it was not properly included in funding reports. Media have also raised questions about the original source of the money.

Analysts said if the investigation ultimately led to Ozawa being sidelined it would be a big blow to the Democrats' hopes of winning a majority in the upper house election since the party is dependent on the veteran lawmaker's campaigning expertise.

Ozawa's image had already been tarnished by the indictment of an aide for taking illegal corporate donations, prompting the political heavyweight to quit as party leader last May.

Hatoyama is also under a cloud over a separate political funding scandal in which two of his former aides were charged over falsified funding records last month.

But a majority of voters say Hatoyama need not resign, partly because he is not seen as having acted for personal gain.

Ozawa's scandal could turn away independent voters who had opted for the Democrats in the lower house election that brought them to power last August, said Yasunori Sone, professor at Tokyo's Keio University.

"In the case of Hatoyama's funding scandal, ultimately many people think that it was family money so ... it wasn't so wicked, but in Ozawa's case, so much is unknown that many people think something is wrong."

(Additional reporting by Linda Sieg and Yoko Kubota; Editing by Michael Watson and Sugita Katyal)