By Linda Sieg
TOKYO (Reuters) - Unpopular Japanese Prime Minister Taro Aso said on Sunday that passing legislation to rescue the economy from recession took priority over calling an early election, which surveys suggest his ruling bloc could well lose.
Aso, an outspoken nationalist and a fan of manga comic books, was chosen by his long-ruling Liberal Democratic Party (LDP) last September to woo voters ahead of an election for parliament's powerful lower house that must be held by September 2009.
But his support has fallen below 20 percent in a survey late last year as the gaffe-prone prime minister battles to keep control over his ruling bloc amid growing unease at the global credit crunch and a rising tide of bankruptcies and layoffs.
Recent polls also show that more voters intend to cast their ballots for the main opposition Democratic Party in the next election, raising the prospect that the conservative LDP, which has ruled for most of the past five decades, could be ousted along with its junior coalition partner, the New Komeito party.
The Democrats, a mix of ex-LDP lawmakers, one-time socialists and younger conservatives, have blasted Aso's policies as a band-aid for the world's second biggest economy and argued they can revive growth by reallocating resources without costing more.
Asked about the timing for a lower house election, Aso told a news conference: "It is clear that we need to be quick on economic steps. It is important to enact the budget and relevant bills quickly and until then, I am not thinking about calling an election."
The annual budget for the year from April 1 usually passes parliament in March but could be later this year because the opposition controls parliament's upper house and can delay bills.
With the political stalemate expected to persist as the Democrats press for an early election, speculation has simmered that Aso might be forced to agree to call a snap poll in return for an opposition pledge not to delay the budget and block laws needed to implement it.
Aso, however, denied he was considering any such deal.
GROWING DOUBTS
Aso has unveiled an 88.5 trillion yen ($960 billion) budget for the fiscal year starting in April, the nation's biggest ever.
That budget, along with two other extra budgets for the current year, will finance 12 trillion yen in fiscal stimulus programmes, which amounts to more than 2 percent of Japan's gross domestic product.
"I am strongly resolved to face this difficult situation and respond to the people's expectations," Aso said after a display of calligraphy, writing the slogans "peace of mind" and "vigour."
"I want to protect the people's livelihoods," he said. "The budget is the most important economic policy."
But doubts are growing over whether Aso -- the third premier to take office since the last general election in 2005 -- has the political muscle to push the budget and related bills through the divided parliament.
Charging that reforms carried out by Junichiro Koizumi during his 2001-06 term as premier had caused pain even before the financial crisis, Democratic Party leader Ichiro Ozawa said the situation would likely worsen over the next three months.
"The people's criticism of the LDP-New Komeito government and calls to seek the will of voters will overwhelm Aso's intention to simply stay in power," Ozawa told a news conference.
The government is expected to submit to parliament on Monday an extra budget worth 4.79 trillion yen fund measures to prevent the economy from slipping further into recession.
The extra budget includes an unpopular plan for 2 trillion yen in payouts to individuals that the Democrats as well as some members of the LDP itself say is a waste of money that will do little to stimulate sagging consumption.
Aso's spending plans have fuelled fears of worsening Japan's tattered finances with public debt already running at 1- times gross domestic product, the biggest in the developed world.
On Sunday, he sought again to allay those concerns by promising to raise the 5 percent consumption tax after the economy recovers.
Speculation is simmering that some dissatisfied LDP lawmakers such as former financial services minister Yoshimi Watanabe might bolt and join the opposition in blocking budget-related bills, a move that could cause Aso's government to unravel.
Aso declined to comment on how he would respond to such a revolt in his party, as did Ozawa when asked a similar question later. "I am not assuming that sort of situation," Aso said.
(Additional reporting by Yoko Nishikawa and Chikafumi Hodo; Editing by Alex Richardson)
