Already beset by opposition attacks, Prime Minister Naoto Kan is facing another threat to his leadership: a deepening rift within his Democratic Party of Japan over how to punish scandal-ridden party don Ichiro Ozawa.

Kan’s bid to pass the fiscal 2011 budget and related bills is already in doubt as Liberal Democratic Party-led opposition forces, who control the Upper House, step up their attacks.

Nevertheless, the more daunting challenge for Kan is bringing Ozawa and his followers into the fold. Key bills that are destined to die in the Upper House need to be overridden by a two-thirds majority in the more powerful Lower House.

“Punishing Ozawa may have a big impact when party unity is of the utmost importance in passing bills and the budget,” said Hiroshi Kawauchi, a DPJ lawmaker close to Ozawa, after a party meeting Tuesday night to determine the kingpin’s punishment.

Implicit in his comment was a threat that Ozawa and his followers may abstain from voting on budget-related bills sent back to the Lower House after being rejected in the upper chamber.

“It’s a game of chicken between the Ozawa side and Kan’s,” said a DPJ source who asked not to be named. The budget itself is expected to clear the Diet even if the Upper House votes it down because the decision of the Lower House, in which the DPJ-led coalition has a majority, takes precedence.

But this arrangement does not apply to related bills necessary to implement the budget. If they are voted down in the upper chamber, the Lower House must muster a two-thirds majority — at least 318 votes — to override the Upper House.

The DPJ and partner Kokumin Shinto (People’s New Party) currently have 311 seats in the lower chamber, in addition to two held by independents close to the DPJ. The ruling bloc thus requires an additional five seats to reach the 318 mark.

The DPJ is reaching out to the Social Democratic Party, a former coalition partner, by offering to revise the budget. But so far their discussions have not borne fruit.

Even if the SDP eventually agrees to support the budget-related bills, it will come to naught if only a single DPJ lawmaker abstains from voting to override the Upper House decision.

The DPJ is expected to formally decide on Ozawa’s punishment by month’s end. He was indicted last month for his alleged involvement in falsifying political funds reports.

The party’s ethics panel decided Wednesday to hear from Ozawa on Thursday before taking the next step.

If his party membership is suspended, Ozawa will be cut off from party funds for political activities, and barred from running for the party presidency or even as a DPJ candidate when a general election is called.

Political commentator Harumi Arima claims Ozawa and his followers are bluffing in a bid to gain the upper hand.

But party leaders are reportedly considering pulling election support for pro-Ozawa candidates in the next Lower House election, which could come soon if Kan is stymied.

“If they think about the next election, I don’t think that is a possibility,” said Arima.

Nevertheless, the topic is the talk of the political district of Nagata-cho.

In a meeting with DPJ Secretary General Katsuya Okada on Tuesday, SDP Secretary General Yasumasa Shigeno touched on the possibility of Ozawa and his supporters abstaining from voting.

“I don’t think anyone will rise up in rebellion and I will make sure such a thing won’t happen,” Okada said, adding he intends to punish those would resort to such a move.

Even if their threats prove hollow, Kan still has to gain the cooperation of the SDP or other opposition parties to clear the budget-related bills.

Political commentator Arima said Kan has few options.

Technically, he can dissolve the Lower House for a snap election, but with the Cabinet support rate hovering around 20 percent, that is not a viable tactic, Arima said.

One possible strategy, albeit weak, is to try to blame the opposition parties for rejecting budget-related bills in the hope that public criticism against them builds, he said.

A likely scenario is the ruling and opposition camps will pass budget-related bills not in dispute and leave only the contentious ones for discussion, the DPJ source said.

“If they can reach an agreement, the DPJ’s key bills are likely to be largely diluted,” the source said.

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