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 by-election defeat.

But former chief cabinet minister Kaoru Yosano, whose name has been floated as a possible successor to Fukuda, also said he thought the Japanese leader should soldier on and try to revive his support rates, now 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 contest for a 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 told Reuters 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 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 Defence Minister Yuriko Koike and Yosano have also been mentioned as possible contenders.

Despite the election loss, the ruling bloc plans to go ahead with a 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 higher prices will start the next day, in the middle of Japan's holiday-studded Golden Week, timing that is unlikely to impress vacationing motorists.

"If this is put off, there will be a hole in national and local government revenues," Fukuda told reporters.

The Democrats argue the tax, which is earmarked for building roads and would bring in 2.6 trillion yen annual revenue, symbolizes 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 and concerns over the pension system.

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 simmering talk that Japan's political scene was ripe for shake up that would help break the stalemate, 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.

(Additional reporting by Yuko Yoshikawa and Yoko Kubota)