Japan finance minister denies drunk at G7

TOKYO (Reuters) - Japan's finance minister denied on Monday that he had been drunk at a G7 news conference but the opposition demanded he be fired, piling pressure on unpopular Prime Minister Taro Aso ahead of an election this year.

Shoichi Nakagawa told reporters after meeting Aso that the prime minister had asked him to stay in his post, but analysts said opposition parties would keep pressing for the minister's resignation.

Nakagawa, 55, a close ally of Aso, said he had only sipped a little wine at a luncheon before the news conference, which followed a Group of Seven finance leaders meeting in Rome.

But he said he had taken a large amount of cold medicine, which may have affected his performance badly.

"What I want the most now is to completely recover from my cold," Nakagawa said.

"I want to make every effort to get the budget bills enacted smoothly," he added, referring to legislation now being debated in parliament.

The fuss over Nakagawa's behaviour at the news conference comes as Aso's public support is plummeting -- below 10 percent in one survey published on Sunday -- ahead of an election that must be held no later than October and as the economy sinks deeper into recession.

If Nakagawa is forced to quit, analysts said, it would be a heavy blow to Aso, struggling to keep his own grip on power after a series of gaffes and policy flip-flops. A departure, however, was unlikely to have much effect on economic policies.

"It is a fact that I didn't conduct myself clearly, and I feel I must put it straight," Nakagawa told reporters in Tokyo about the news conference in Rome.

At the news conference with Bank of Japan Governor Masaaki Shirakawa after the G7 meeting, Nakagawa's speech sounded slurred. At one point, Nakagawa, his head down and eyes closed, mistook a question directed at the BOJ governor as one for him.

Nakagawa said his performance had not harmed Japan's standing or its relations with G7 nations, but the main opposition Democratic Party said he should lose his job.

"His responsibility for having shown disgrace to the world is heavy. I think this is an embarrassment," Democratic Party leader Ichiro Ozawa said.

POTENTIALLY LETHAL?

Kyodo news agency quoted an unidentified executive from Aso's Liberal Democratic Party as saying Nakagawa should resign.

Former Prime Minister Yoshiro Mori, asked about the news conference, told Japanese TV he had discussed such issues with Nakagawa in the past.

"Since he really loves to drink, I advised him once to be careful about drinking," Mori said.

Democratic Party No. 2, Yukio Hatoyama, told reporters the party may submit a censure motion against Nakagawa to parliament's upper house if the matter was not resolved soon.

A censure motion in the upper house, controlled by the opposition, is non-binding but one minister was pressured to resign in the past by such a resolution.

"From here on, there will be a tug-of-war between the media and the government, and between the Democrats and the government," said Yasunori Sone, a political science professor at Tokyo's Keio University.

Political analysts said if Nakagawa, a right-leaning lawmaker who has held trade and farm portfolios, lost his job it would be a serious blow to the faltering Aso, who appointed his close ally to hold both the finance minister post and the banking supervision portfolio when he took office last September.

"Losing someone in charge of the financial system and public finances at this juncture ... is potentially lethal for his own tenure," said Koichi Nakano, a Sophia University political science professor.

Even if Nakagawa stays, "it will add to the impression that Aso is well past his expiration date," Nakano said.

A survey by TV Asahi broadcaster published on Monday put support for Aso's cabinet at 13.7 percent. Seventy percent of voters said the prime minister should either quit soon or after the expected enactment of pending budget bills in the spring.

More than half -- 51 percent -- said they wanted the Democratic Party to lead the government after the next election.

Japanese TV broadcasters and national newspapers called attention to Nakagawa's behaviour at the news conference at the G7 gathering to discuss the world financial crisis. Video of the media conference was widely circulated on the Internet.

Japan has been hit hard by the global downturn. Its economy is suffering an unprecedented slump in exports, posting in the final quarter of last year its biggest GDP contraction since the first oil crisis in 1974.

(Additional reporting by Chisa Fujioka and Yoko Kubota; Writing by Linda Sieg; Editing by Alex Richardson)