UPDATE 1-Japan ruling party to extend parliament, eyes $25 bn for next budget

Wed Jun 15, 2011 3:10am EDT

* Pressure mounts for PM Kan to step down soon

* Ruling bloc struggles to pass bills in split parliament

* Democrats seeks a 2 trln yen extra budget - sec-gen (Adds comments on size of next budget, details)

By Chisa Fujioka

TOKYO, June 15 (Reuters) - Japan's ruling party will extend a session of parliament to approve extra spending needed to rebuild areas ravaged by the March 11 earthquake and tsunami, a party official said on Wednesday, although it is unclear if the bills will win support from a combative opposition.

The ruling Democratic Party (DPJ) is struggling to pass legislation in the parliament, where the opposition controls the upper house and has been blocking bills to try to force unpopular Prime Minister Naoto Kan to resign.

The party's No. 2, Katsuya Okada, said it planned to submit a "compact" extra budget in mid-July, followed by a bigger extra budget later on, also for reconstruction. The party is looking at spending of around 2 trillion yen ($24.9 billion)in the next extra budget after a first budget double that size was approved in May, Jiji news agency quoted Okada as saying.

Kan ordered his cabinet ministers on Monday to compile an additional budget for submission next month.

"It would be unthinkable to close parliament and take a summer break while we are dealing with the disaster," Okada, the DPJ secretary-general, said in a speech to a union group.

"We need a big extension of the parliament session to debate and pass necessary bills."

Kan, in office for one year as Japan's fifth prime minister in as many years, survived a no confidence vote early this month by promising to step down, though he did not say when. The pledge, however, failed to break a policy deadlock with the opposition, which refuses to cooperate with the Democrats as long as Kan stays on.

Besides the extra budget, lawmakers have yet to approve a bill needed to fund more than 40 percent of this fiscal year's budget and a draft law on compensation to victims of radiation leaks at Tokyo Electric's (Tepco) Fukushima nuclear plant.

However, it may take more than Kan's departure to reach an agreement.

The opposition is pressing the ruling party to drop some of its other spending plans and politicians are at odds over the compensation bill to help Tepco pay billions of dollars in compensation to businesses and individuals from around the Fukushima plant.

Kan, struggling with dismal popularity ratings before the March 11 disaster, drew fire for slow and indecisive response to what he himself described as Japan's worst crisis since the World War Two.

The opposition and critics within his own party want Kan to leave this month, which could possibly clear the way for a coalition with the main opposition Liberal Democratic Party.

The current session of parliament was due to end on June 22.

Finance Minister Yoshihiko Noda said on Tuesday the government would avoid issuing extra bonds to finance the second extra budget, which aims to cover areas including those related to the nuclear crisis triggered by the disaster.

Okada agreed with the party's parliamentary affairs chief that the session should be extended for three months, Jiji news agency reported.

($1 = 80.440 Japanese Yen) (Additional reporting by Tetsushi Kajimoto; Editing by Tomasz Janowski and Daniel Magnowski)