By Chisa Fujioka
TOKYO (Reuters) - Japanese Prime Minister Taro Aso appeared ready to call a general election for early August despite defeat in a local vote, but many in his ruling bloc feared on Monday that an early poll would be political suicide.
Moves within the Liberal Democratic Party (LDP) to dump Aso were expected to grow after the ruling party and its junior partner lost their majority in the Tokyo assembly on Sunday. The opposition Democratic Party won the most seats.
A Democratic Party victory in the national parliament's lower house would end half a century of nearly unbroken rule by the business-friendly LDP and raise the chance of resolving political deadlocks as Japan tries to recover from its worst recession since World War Two.
Aso told senior ruling party lawmakers on Sunday he planned to dissolve the lower house as early as Tuesday and was set to unveil that plan on Monday, Kyodo news agency reported, adding the likely date for the election was August 8.
"There is no change in that I will make a decision myself," Kyodo quoted Aso as telling Chief Cabinet Secretary Takeo Kawamura in a meeting on Monday.
Many in the LDP and its junior coalition partner, the New Komeito, are opposed to holding an election so soon after their defeat in the Tokyo poll, seen as a barometer for a national election due by October.
"It's clear if parliament is dissolved now, the result would be the same as the Tokyo election," the New Komeito's policy chief, Natsuo Yamaguchi, told a TV Asahi programme.
LDP executive Nobuteru Ishihara said on Sunday that while a decision on when to call an election was up to Aso, time was needed to re-unite the party, suffering from voter angst over the economy and longer-term worries such as growing welfare costs.
But another senior LDP lawmaker, Takashi Sasagawa, told reporters on Monday that he thought the election should be called as soon as key bills passed parliament.
The Democrats, hoping to intensify pressure on the ruling bloc, are considering submitting a no-confidence motion against Aso in the lower house.
The decade-old Democratic Party has capitalised on the LDP's falling popularity in recent years, taking control of the upper house with smaller allies in 2007.
An opposition win in the general election could smooth policy implementation by resolving deadlocks in the divided parliament, but some analysts say the Democrats' large spending plans could inflate public debt and push up government bond yields.
INTERNAL STRIFE
The long-ruling LDP has been racked by internal strife, with Aso critics openly urging an early party leadership vote to replace him while his allies defend his right to call a general election at a time of his choosing.
"There will be confusion inside the LDP. People will try to oust Aso and he will try to stay on," said Keio University political science professor Yasunori Sone.
"It is not clear if they can oust him and if they did, would support for the LDP increase? Not much," Sone said. "Chances the LDP could win under a new leader are very small. That has become clearer as a result of this Tokyo election."
Possible candidates to replace Aso include Minister of Health, Labour and Welfare Yoichi Masuzoe, 60, a former academic and TV commentator seen as competent and hardworking.
But Aso is Japan's third premier to take office since Junichiro Koizumi led the party to a huge win in a 2005 election, so voters might not be impressed with another change at the top.
Japan's biggest opposition party has its own headache.
Democratic Party leader Yukio Hatoyama has apologised for the fact that some people listed as his political donors were dead.
Hatoyama took over as party leader in May after his predecessor stepped down to keep a separate fundraising scandal from hurting the party's chances at the polls.
(Additional reporting by Linda Sieg, Yoko Kubota; Editing by Alex Richardson)
