(Adds Fukuda, paragraphs 11-12)
By Chisa Fujioka
TOKYO, Dec 20 Japanese hepatitis patients on Thursday rejected a government compensation proposal in a high-profile scandal over tainted blood, a move that could further erode Prime Minister Yasuo Fukuda's falling poll ratings.
Media are presenting the emotive scandal, in which people received tainted blood products years ago, as a test for Fukuda, who already faces voter anger over mishandled pension records and a bribery case involving a former top defence official.
At least 10,000 people are estimated to have contracted hepatitis C from tainted products. Most cases have been linked to fibrinogen, a coagulant used to stop haemorrhaging during surgery or childbirth and sold in Japan even after it was withdrawn in the United States in 1977.
A group of patients had sued the government and drug makers seeking compensation but rejected a settlement proposal by a regional court last week, saying it would only provide aid to a limited number of them.
They called on Fukuda to go beyond the court proposal and provide compensation under equal conditions to all who contracted hepatitis from tainted blood products. The patients had also repeatedly asked for a meeting with him but were turned down.
"As long as the government continues to draw a line for lives, we cannot go on with settlement talks," Tomoko Kuwata, one of the plaintiffs, told reporters.
"Why were our fair demands not accepted? It makes me sad," she said, with tears in her eyes.
Health Minister Yoichi Masuzoe, while bowing in apology for the scandal before flashing cameras, told a news conference the government could not pay compensation beyond the court proposal.
The government has offered to pay money directly to around 700 patients, while setting up a common fund for 300 others, in a deal worth a total of around 17 billion yen ($150 million), Kyodo news agency said.
"We cannot have an settlement that goes against the settlement proposal by the Osaka High Court," Masuzoe said.
Later on Thursday Fukuda apologised for the sufferings inflicted on the hepatitis patients and said he would deal with the compensation issue "flexibly".
"I want to apologise from my heart" Fukuda told reporters. "We don't think we have done everything. If the high court makes a decision, we will respond flexibly. I want the accusers to come forward for talks."
Media have said Fukuda was under pressure to appeal to voters but at the same time was wary of financial commitments that could amount to nearly 200 billion yen if the government were to compensate all hepatitis patients infected with tainted blood.
The breakdown in talks with hepatitis patients comes less than a week after public opinion polls found support ratings for Fukuda's cabinet had plunged as low as 33 percent.
This decline is likely to embolden the main opposition party, which along with other small groups holds a majority in the Upper House, to put pressure on Fukuda to call a snap election.
Patients and critics say the hepatitis scandal is a disturbing rerun of a cover-up over the exposure of nearly 2,000 haemophiliacs to the human immunodeficiency virus (HIV) in the early 1980s.
In October, the government was embarrassed when Health Ministry officials admitted to processing data that would have helped identify or warn hundreds of hepatitis patients before their illnesses worsened.
Hepatitis C can lead to chronic liver infection and cirrhosis. About 1 percent to 5 percent of people with the disease eventually die from long-term infection, according to the U.S. Centers for Disease Control and Prevention. ($1=113.26 Yen) (Additional reporting by Teruaki Ueno; editing by George Nishiyama and Roger Crabb)