Japan government support drops further in blow to PM

Japan's Prime Minister Yukio Hatoyama attends a plenary session at the Upper House in Tokyo February 2, 2010.

TOKYO (Reuters) - Support for Japanese Prime Minister Yukio Hatoyama's government has slipped further, a newspaper poll showed on Monday, adding to the leader's woes ahead of a midyear election that his party needs to win to avoid policy deadlock.

Hatoyama's Democratic Party took power after an election for the more powerful lower house last year, but it needs to win a majority in the upper house to drop an awkward coalition with two smaller parties to smooth policy-making.

Support for the government has fallen to 37 percent from 41 percent earlier this month, a poll of more than 2,000 voters by the Asahi Shimbun daily showed. Disapproval was at 46 percent.

The poll follows another blow for Hatoyama on Sunday, when a candidate backed by his party lost an election for governor in southern Japan, in a sign of voter frustration over a scandal ensnaring the party's No.2 executive, Ichiro Ozawa.

The weekend gubernatorial vote was seen as the first test for the Democrats after three of Ozawa's current and former aides were charged for misreporting political funds.

Ozawa acknowledged on Monday that the scandal was one of the reasons for the loss.

"I am very sorry that I caused trouble to everyone due to my failings and clearly this (the scandal) was not a plus," he told a news conference.

Ozawa added that he would keep trying to gain the voters' understanding as he travels around the country ahead of an upper house election expected in July.

Hatoyama echoed Ozawa's sentiments, saying he intended to fight the election with Ozawa in his key post.

While a majority of voters want Ozawa to step down from the party's secretary-general post, his departure could delay policy-making because he is seen by many as the real power behind the government and can make tough decisions when others can't.

Ozawa is also known for his campaigning mastery, and is regarded as vital for the party before the upper house vote.

It was still unclear if Ozawa would step down, given the chances that the Democrats could try to woo the public with policies ahead of the upper house vote, said Sophia University professor Koichi Nakano.

"If the government can fill the news with positive achievements, the scandal won't be the only thing in the news," he said.

"I don't think Ozawa will quit immediately. The question is, will things improve in the spring?"

The main opposition Liberal Democratic Party turned up the heat on Monday, boycotting debate over the budget for the year starting in April after the Democrats failed to agree to have Ozawa appear to explain the scandal.

The ruling coalition is likely to force the budget through, although that could upset voters who are also calling for Ozawa to explain about the scandal.

Hatoyama's government is hoping to win back voters with efforts to slash wasteful spending and bring down Japan's huge public debt, now around twice the size of the country's gross domestic product.

Standard and Poor's said last month it would cut Japan's rating unless the government produced a credible plan to rein in debt and lift growth for the deflation-ridden economy.

Still, there is relatively little chance that S&P will downgrade Japan's sovereign rating this year unless there is a major economic shock, analyst Takahira Ogawa said on Monday.

(Additional reporting by Linda Sieg and Yoko Kubota; Editing by Chris Gallagher)