TOKYO (Reuters) - Japanese prosecutors will likely not charge ruling party No.2 Ichiro Ozawa over a funding scandal that has dented government support ahead of a key election, two national newspapers reported on Wednesday.
Ozawa's skills as a campaign strategist are thought vital to the ruling Democratic Party's performance in the upper house election, in which it needs to win a majority to pass bills smoothly without relying on two tiny coalition partners.
If Ozawa clings to his post as party secretary-general voter suspicions over the scandal could scupper the Democrats' chances of victory in the mid-year poll even if he is not charged. The result could be policy gridlock.
The Mainichi and Asahi newspapers said Tokyo prosecutors were not planning to prosecute Ozawa over misreporting of political funds due to lack of evidence, and the Yomiuri newspaper said prosecutors would make a final decision on Wednesday.
One of Ozawa's former aides is set to be charged over the affair on Thursday, media reports say. A newspaper poll published earlier this week showed more than three-quarters of respondents wanted Ozawa to resign if the aide was indicted.
"Ozawa himself will want to bring down the curtain on the case but I don't think it will end," said political analyst Katsuhiko Nakamura of Asian Forum Japan. "What's being questioned is his ethics as a politician, and that will continue."
"For the DPJ, it would be easier to reach a conclusion if Ozawa was charged. From here on, they will be on a bed of nails and ... discord within the party will continue," he said.
Transport Minister and former party leader Seiji Maehara hinted at weekend at the possibility of dropping Ozawa, saying the party would need to demonstrate its ability to keep its house in order if the case progressed to a new stage.
Under fire after three current and former aides were arrested in January on suspicion of misreporting political donations, Ozawa has hinted he might resign if he came under suspicion of criminal activity himself. But he has denied having taken any illegal contributions or bribes.
Prime Minister Yukio Hatoyama's Democrats came to power in a general election for the more powerful lower house last August. They risk policy paralysis if they fail to win a majority in the upper house at a time when Japan is struggling to maintain a fragile economic recovery and rein in its massive public debt.
Hatoyama told reporters this week he would like to have Ozawa stay in his position for the election.
