UPDATE 1-Japan kingpin Ozawa charged in funding scandal

Mon Jan 31, 2011 1:06am EST

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TOKYO Jan 31 (Reuters) - Japanese ruling party powerbroker Ichiro Ozawa was charged on Monday over a funding scandal, a court spokesman said, a widely expected judicial move that could widen a rift in the ruling party over whether he should leave the party.

Ozawa's indictment will give fresh ammunition to opposition parties who control parliament's upper house and are refusing to join multiparty talks on tax reform to curb Japan's huge debt.

They are instead trying to force Prime Minister Naoto Kan to either resign or call a snap election for the powerful lower chamber.

Ozawa, a seasoned political strategist who once headed the ruling Democratic Party of Japan (DPJ), faced mandatory indictment over suspected misreporting by his political funds body after a lay judicial panel decided last year that he must be charged.

The 68-year-old has denied any wrongdoing.

Ozawa's prosecution could widen a split in the DPJ and further distract Kan and his government from making decisions on deepseated policy problems as it seeks ways to pass bills in a divided parliament and bolster a weak economy.

The scandal has helped drag down voter support for the government to about 30 percent and caused a split in the DPJ over Ozawa's fate, after Kan hinted that he should leave the DPJ and even resign his seat in parliament once he was indicted.

Kan and DPJ executives will now have to decide how to respond to Ozawa's indictment, including whether to try to issue a warning that he should leave the party.

Attempting that could further fray party unity just as the government is seeking opposition help to pass legislation to implement a record $1 trillion budget for the year from April 1.

Ozawa has indicated that he has no intention to leave the DPJ or resign his seat in parliament.

Ozawa left the then-ruling Liberal Democratic Party (LDP) in 1993 with some 40 lawmakers, sparking a chain reaction that briefly pushed the party from power. Analysts say that with his clout now waning, it is unclear how many of his backers would follow him into the opposition this time. (Reporting by Yoko Kubota; Editing by Michael Watson)