By Linda Sieg
TOKYO (Reuters) - Japan's main opposition party will vote on Saturday for a new leader, a party official said, to replace scandal-tainted Ichiro Ozawa, who resigned in a bid to revive the party's chances of winning an election just months away.
Ozawa's decision to step down appears to have bolstered his Democratic Party's chances of ousting Prime Minister Taro Aso's conservative Liberal Democratic Party (LDP) and ending its more than five decades of almost unbroken rule.
That would usher in a government pledged to pay more heed to consumers and workers than companies, reduce bureaucrats' control over policy, and strengthen the social safety net while trying to revive domestic demand in the recession-hit economy.
For possible successors, analysts focussed on former party leader Katsuya Okada, 55, a soft-spoken former trade official with a "Mr Clean" image, and Yukio Hatoyama, 62, another ex-party chief and a fourth generation politician who was one of Ozawa's deputies.
Analysts said the Democrats' platform was unlikely to change much if at all, although Okada might be more willing to point out the need to raise Japan's 5 percent sales tax eventually to fund the bulging social security costs of a fast-ageing society.
Hatoyama has also referred to that possibility and Aso has said it would be necessary after the economy recovers.
Democratic Party executives decided on Tuesday to hold the leadership vote on Saturday, a party official told reporters.
Ozawa's sudden resignation on Monday had little impact on financial markets, though many players are eager to see an end to a political stalemate that has stymied policy in the world's second-biggest economy as it struggles with its worst recession in 60 years.
"Investors are paying more attention to the government's economic steps than the political situation as the government's current stance is close to a dole-out policy," said Takahiko Murai, general manager of equities at Nozomi Securities.
Policy-making has been hampered since opposition parties won control of parliament's upper house in 2007, allowing them to delay legislation.
EAGER FOR CHANGE?
The Democrats, a decade-old party including former LDP members, ex-socialists and younger conservatives, had looked poised to win the election until Ozawa's aide was arrested and charged with accepting illegal campaign donations in March.
Analysts say the party could now regain momentum -- if it selects a new leader without the internal squabbling that has plagued the Democrats in the past.
"The Japanese electorate is eager for change, so long as they can overcome their fear that the Dems are not capable of ruling," said Daniel Sneider, associate director of research at Stanford University's Shorenstein Asia-Pacific Research Centre.
But some warned Ozawa's replacement may lack his expertise at election strategising and ability to play hardball politics.
"Ozawa's popularity and Aso's popularity have been like a see-saw. When Ozawa lost popularity, Aso's improved. So now that Ozawa has resigned, Aso's popularity will fade," said Hirotaka Futatsuki, an independent political commentator.
"But the extent to which the Democrats' regain support will depend on who the next leader is, and how smoothly he is chosen."
Aso, 68, had seen his public support rise above 30 percent in some polls since the opposition scandal broke.
But the prime minister insisted on Monday that the opposition drama would not affect his decision on the timing of an election.
Aso has said he wants to focus on enacting an extra budget to fund a record 15 trillion yen (100 billion pounds) stimulus package.
That budget is likely to be approved by the lower house this week and take effect 30 days later even without approval by the opposition-controlled upper chamber.
Analysts said the general election was unlikely to be called until after Aso attends a Group of Eight summit in Italy in early July and after a Tokyo Metropolitan assembly election on July 12, partly in the hope that the economy will improve by then.
"Early August, late August -- it's hard to tell," said Sophia University professor Koichi Nakano. "Given Aso's record of waiting, unless he's become a different person, he is going to want to wait for a better time."
(Editing by Rodney Joyce)
