* U.S. base row, funding scandal erode PM's support
* Survey bodes ill for ruling party in upper house poll
TOKYO, May 14 Voter support for the government of Japan's embattled Prime Minister Yukio Hatoyama has fallen to 19.1 percent, slipping below 20 percent for the first time ahead of a key mid-year election, a Jiji news poll showed on Friday.
Public perceptions that Hatoyama has mishandled a row over a U.S. Marine base in southern Japan, which he has promised to settle by the end of May, and a funding scandal embroiling ruling party kingpin Ichiro Ozawa have steadily eroded support from around 70 percent when the premier took office in September.
Hatoyama's Democratic Party needs a decisive win in the upper house vote expected in July to enact laws smoothly, while a loss for the ruling coalition would spell policy deadlock as Japan nurtures a fragile economic recovery while trying to rein in massive public debt. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic on Japan voter support: r.reuters.com/myv63g Graphic on voting intentions: link.reuters.com/jev83j For more stories on Japanese politics click [ID:nPOLJP] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
"It has been falling substantially for a while. I was expecting it to go down, but I am a bit shocked," Foreign Minister Katsuya Okada told reporters.
Support for Hatoyama was down 4.6 percentage points on a previous survey last month, Jiji news agency poll said.
Both the funding scandal and the row over the U.S. base on the southern island of Okinawa will come under renewed focus this weekend, with islanders set to hold a demonstration, while prosecutors may quiz Ichiro Ozawa next week in an effort to revive a criminal case against him.
Many voters say they feel Hatoyama lacks leadership qualities, and his government appeared to flipflop this week in a row over relocating the Futenma U.S. Marine base on the southern island of Okinawa.
On Friday Hatoyama reiterated a pledge to resolve the row by the end of the month, though a day earlier he had admitted that would be difficult and vowed to keep trying after the deadline has passed.
About half the respondents to the Jiji survey said they thought Hatoyama should resign if he missed the deadline.
Analysts say he may stay in his job because resignation would not necessarily help his party at the election, but his unpopularity may force the Democrats into a change of tack.
"The Democrats may need to change their campaign strategy, to give up on winning a majority on their own," said Noritada Matsuda, associate professor at the University of Kitakyushu.
This would mean cooperating more with their tiny coalition partners, and perhaps steering clear of sensitive policies such as raising consumption tax, he said.
When asked which party they would vote for in the upcoming election, 18.3 percent opted for the main opposition Liberal Democratic Party, compared with 17 percent for the the Democrats.
Jiji's surveys, which are conducted by face-to-face interview, tend to show lower government support rates than the telephone surveys conducted by other media. (Reporting by Isabel Reynolds and Chisa Fujioka)