Beleaguered Japan PM in pinch after by-election loss

TOKYO (Reuters) - Calls to replace Japanese Prime Minister Yasuo Fukuda are emerging in his Liberal Democratic Party, an influential ruling party lawmaker said on Monday, after the ruling bloc suffered a bruising defeat in a by-election.

But former chief cabinet minister Kaoru Yosano, whose name has been floated as a potential successor to Fukuda, told Reuters he thought the Japanese leader should soldier on and try to revive his support rates, which have dropped below 30 percent.

In a vote widely seen as a referendum on Fukuda's struggling administration, former opposition Democratic Party lawmaker Hideo Hiraoka defeated the LDP's Shigetaro Yamamoto in Yamaguchi, central Japan in Sunday's race for a vacant lower house seat.

"I think we should continue this administration until as close as possible to the end of term in September next year and wait for the support rate to rise," Yosano said in an interview.

Fukuda's support rate fell to 25 percent in a recent survey due mainly to doubts about his leadership in the face of a divided parliament, where the opposition controls the upper house and can delay laws.

"Of course, it is true that the opinion has emerged inside the party that it is impossible to revive the administration's support rates, so if there is to be an election, it should be done under a new administration," the 69-year-old Yosano added.

"I don't know how far that view will spread."

The ruling bloc loss in Sunday's poll is all but certain to embolden opposition Democratic Party leader Ichiro Ozawa to step up efforts to force an early general election.

No lower house election need be held until September 2009. But some financial market players, frustrated with Japan's policy paralysis, would like to see an earlier poll in hopes it could help break the gridlock, perhaps by sparking a realignment of political allegiances among members of the two main parties.

ELECTION "SUICIDE"

Yosano, however, said that calling an election any time soon would be suicidal for the long-ruling LDP, given Fukuda's sagging popularity and voter dissatisfaction with the party itself.

"An election in the current situation ... would invite the LDP's own death," he said,

Analysts said Fukuda might manage to hang on at least until after he hosts the Group of Eight (G8) rich nations' summit in July, but added that his political clout would likely wane.

Outspoken former foreign minister Taro Aso is viewed as the frontrunner to replace him, but former Defense Minister Yuriko Koike and Yosano have also been mentioned as possible contenders.

Despite the election loss, Chief Cabinet Secretary Nobutaka Machimura said the ruling bloc would go ahead with its plan on Wednesday to use its two-thirds majority in the lower house to override the upper chamber and enact a law reviving a "temporary" 25 yen (23 cents) gasoline tax that expired on March 31.

The Democrats argue the tax, which is earmarked for building roads and would bring in 2.6 trillion yen annual revenue, is an example of the LDP's wasteful spending on vested interests.

The tax was a focus of the Yamaguchi election along with a new and unpopular health insurance scheme for those 75 and over.

Democratic Party leaders have threatened to submit a non-binding but embarrassing censure motion against Fukuda in the upper house if the tax is revived. But the opposition is now seen more likely to wait until after May 12, when the ruling bloc plans to use its two-thirds majority again to pass another law outlining a 10-year plan for road construction.

Critics, including some in the LDP, say the bill contradicts Fukuda's own proposal to stop earmarking the gas tax for roads.

Asked about talk Japan's political scene was ripe for a shake up that would help break the stalement, Yosano said such moves could gather steam later this year. But he denied he would be a major player. "I'm a silent observer," he said modestly.

(Additional reporting by Yuko Yoshikawa and Yoko Kubota; Editing by Sanjeev Miglani)