UPDATE 5-Japan opposition leader quits ahead of election
(For more stories on Japanese politics click [ID:nPOLJP])
* Main opposition party leader resigns to help party
* Scandal had eaten into opposition Democratic Party's lead
* Move to improve election chances, but not all damage undone
TOKYO, May 11 (Reuters) - Japanese opposition leader Ichiro Ozawa resigned on Monday in a move that is likely to improve his party's prospects in a looming election, after a fundraising scandal dampened its hopes for victory.
A political stalemate and voter frustrations with Prime Minister Taro Aso had raised the chances Ozawa would lead his Democratic Party to victory in an election that must be held by October, ending more than 50 years of nearly unbroken rule by Aso's Liberal Democratic Party (LDP).
But the Democratic Party's lead in polls has narrowed after the scandal, clouding the outlook for the solid opposition victory that would break a deadlock that is stalling policy decisions as Japan struggles with a deep recession. [ID:nT75082]
"I have decided to sacrifice myself and resign as party leader to strengthen the unity of the party towards a clear victory in the next election and achieve a change in government," Ozawa told a news conference.
The Democrats have vowed to reduce bureaucrats' meddling in policy-making, stress the rights of consumers and workers over corporate interests, and adopt a diplomatic policy less subservient to security ally the United States.
Those positions were unlikely to be altered by Ozawa's departure, although a rejuvenated opposition might encourage the LDP to come up with extra stimulus plans to attract voters.
A 15 trillion yen ($153 billion) spending package is already on its way through parliament. [ID:nT56332]
Ozawa's resignation had little impact on financial markets, with the yen JPY= trading a touch lower after an initial media report, but broadly unchanged on the day. FXNEWS [FRX/]
Aso, who has threatened to call an early election if the Democrats obstruct debate in parliament on the massive extra budget to fight the recession, told reporters Ozawa's resignation would have no direct impact on the election timing.
Recent speculation has focused on an August vote.
"Now that (Ozawa) is gone, Prime Minister Aso might become more aggressive in economic stimulus to woo voters, rather than dissolving parliament now," said Hidenori Suezawa, chief strategist at Daiwa Securities SMBC. Continued...
