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(For more stories on Japanese politics click on [ID:nPOLJP])
*Japan opposition leader Ozawa suffers from dual images
*Ozawa's woes cast doubt over party win at polls
*Analysts say too soon to declare opposition defeat
By Linda Sieg
TOKYO, March 5 (Reuters) - Japanese opposition leader Ichiro Ozawa has long been something of a paradox.
Now his fight to keep his job despite a scandal that has ensnared a close aide has put his dual images as a bold advocate of reform and an old-style fixer under a harsh spotlight.
Ozawa, 66, on Wednesday denied any wrongdoing and said he would not resign over the arrest of the aide on suspicion of taking illegal corporate donations, and accused prosecutors of abusing their authority ahead of an election his Democratic Party looked likely to win.
The affair has cast doubt over whether the Democrats can score a decisive victory over unpopular Prime Minister Taro Aso's ruling party, a win that could break Japan's prolonged political deadlock as the country struggles with a worsening recession. Analysts say Ozawa might yet have to step down. [ID:nT328584]
More than 15 years after bolting the ruling Liberal Democratic Party, Ozawa has been betting this year's election is his best shot at ousting the conservative party whose more than 50 years of dominance he says has bred corruption and stagnation.
A protege of Kakuei Tanaka, a former prime minister who built Japan's postwar political regime of pork-barrel spending, party factions and vested interests, Ozawa has nonetheless been a consistent advocate of change.
"Everyone knew about his contradictory personality, being a powerful reformer of Japan's political system but also coming from the heart of it ... and a master of old-style deal-making," said Sophia University political scientist Koichi Nakano.
"It seems his past is finally his undoing," he added.
"He may come out clean, but the political damage is done."
TV shows reporting on the scandal have dug out footage of Ozawa with his long-deceased mentors -- Tanaka, who was arrested in 1976 and later convicted of taking bribes from Lockheed Aircraft, and Shin Kanemaru, an LDP baron who resigned from parliament in 1992 after admitting to taking bribes.
Still, some analysts said it was too soon to assume Ozawa would have to resign or risk leading the Democrats to defeat.
"I don't think you can draw that conclusion yet," said Gerry Curtis, an expert in Japanese politics at Columbia University.
"I still find it hard to believe that a scandal, after years in which scandals have been so common, will make people say they will stick with a party and a prime minister they don't like."
Aso, Japan's third premier in less than two years, is struggling with voter support rates of around 10 percent and surveys had suggested the LDP was heading for defeat at the hands of voters fed up with what they see as incompetence and waste. [ID:nT124962]
"It (the scandal) helps the LDP, but I don't think it will fundamentally change the outcome," Curtis said.
Once an LDP rising star, Ozawa left the party in 1993 and helped briefly oust it. That same year he outlined his policies in a book, "A Blueprint for a New Japan", calling for a bolder security role and reforms to reduce bureaucratic control.
In recent years, Ozawa has sounded a more populist note amid a backlash against pro-market reforms, pledging to shrink income gaps and "put the people's livelihoods first".
Ozawa also helped engineer the introduction of single-member districts for parliament's lower house, an electoral reform experts agree was vital for the rise of a true two-party system.
A skilled player of the Japanese chess-like game of Go, he has spent the past decade and a half strategising to create a viable rival to the LDP. His small Liberal Party merged with the Democrats in 2003 and three years later, he took the helm.
Speculation has simmered as to whether Ozawa, who suffered a heart attack in 1991, is physically up to the rigours of being premier, although he and his aides have brushed off such concerns.
Ozawa has also been dogged by a reputation as an autocratic loner who destroys the parties he creates.
He jolted the political scene in late 2007 by discussing a "grand coalition" with then-prime minister Yasuo Fukuda to break the policy deadlock, a proposal roundly rejected by his party.
But his skills at campaign strategy and ability to hold the sometimes fractious Democrats together prompted party members then to beg him to remain in the top party post.
Some analysts suggested the Democrats might yet fare well at the polls, if Ozawa is replaced with a more appealing leader who lacks the same sort of historical baggage.
"If he does it (quits) quickly, they can recover to an extent ... if the electorate is presented with what looks like solid leadership and the turning of a new page," Sophia's Nakano said. (Editing by Valerie Lee)