The Democratic Party of Japan’s key executive body opted Tuesday to suspend Ichiro Ozawa’s party membership pending the outcome of his trial, despite rising pressure from the indicted kingpin’s allies to withhold punishment.

Besieged Prime Minister Naoto Kan, who is also the DPJ president, meanwhile apparently warned he might dissolve the Lower House and call a snap election amid the threats from both Ozawa’s disciples and the opposition camp not to vote for key bills needed to support the fiscal 2011 budget.

The Social Democratic Party meanwhile said it will oppose the budget-related bills, effectively killing any chance they will clear the Diet without massive revisions.

Ozawa slammed his suspension from the DPJ, calling it unwarranted.

“The punishment proposed upon me is unprecedented,” Ozawa said in a statement submitted to the party’s ethics panel in the morning. “There is no rational reason why I should be (singled out).”

Given the opportunity to explain himself before the panel, Ozawa said his indictment differs from ordinary cases in which the charges are leveled by prosecutors confident of a conviction.

He pointed out that in his case, an independent judiciary panel said a court should decide if he is guilty of charges that he falsified his political funding reports because its members were not certain he was culpable.

Ozawa also argued it is “unjust” for the party to suspend his membership until the outcome of his trial, as DPJ rules stipulate such punishment can last no longer than six months.

“It is unprecedented and hard to understand,” he said.

Ozawa’s suspension was formalized by a meeting of DPJ executives later in the day, clearly upsetting members loyal to him.

“This will (seriously) affect party unity,” DPJ lawmaker Hiroshi Kawauchi told reporters after leaving the Standing Officers Council meeting before it ended, saying the suspension was unreasonable.

“I would make a formal objection if I were Ozawa,” Kawauchi said.

Since 16 party members loyal to Ozawa demanded on Feb. 17 that they be allowed to form a separate parliamentary group — a move perceived as a threat to vote against the budget-related bills — the DPJ’s internal rift has widened and Kan’s political footing has grown more precarious.

Ozawa’s allies, mainly DPJ rookies, want Kan to step down in hopes that someone in their camp can succeed him. But Kan’s reported threats to dissolve the Lower House and call an election would probably doom them as they lack a strong electoral foundation.

Ozawa reportedly told aides Monday that Kan may dissolve the chamber.

“A gust of wind suggesting an election has begun to blow,” said a DPJ member who asked not to be named.

But Hidekazu Kawai, a professor emeritus of political science at Gakushuin University, said Kan is likely to hold on to his position because calling an election wouldn’t benefit him or his party, which is already suffering low public support.

“If he calls an election, the DPJ may well be defeated,” Kawai said.

Kan should instead try to weather the storm until he achieves his key nonbudgetary goals, such as tax and pension system reforms, including a consumption tax hike, and joining U.S.-led negotiations on the Trans-Pacific Partnership free-trade accord, Kawai said.

“It may be tough until summer, but once he makes progress, (including with the) TPP, criticism against him may fade,” he said.

The DPJ-led ruling bloc has failed to persuade any opposition parties to back the fiscal 2011 budget and its related bills, with the SDP, a former coalition partner and one Kan had been counting on, the latest to defy him.

“The Kan administration is going in the opposite direction from rebuilding the people’s lives by (his desire) to join the Trans-Pacific Partnership Agreement and trying to cut the corporate tax while raising the consumption tax. This sounds inconsistent,” SDP leader Mizuho Fukushima said.

During a morning meeting of all SDP members of the Diet, the party ruled out voting to support a special bill to issue deficit-covering Japanese government bonds and another on tax system revisions, including cutting the corporate tax by 5 points.

If passage of the bill on deficit-covering bonds is delayed, the impact will be severe because it covers 44 percent of annual revenues, or ¥40.7 trillion.

The SDP has offered to cooperate on the bills if the DPJ scraps outlays related to U.S. Marine Corps Air Station Futenma in Okinawa and drops plans to slash the corporate tax.

New Komeito, the second biggest opposition party, said earlier this month it would refuse to support the JGB-covering bill. The Liberal Democratic Party, the largest opposition force, has also come out against the budget bills.

Chances are dim that the ruling bloc can secure the two-thirds majority in the Lower House needed to override any veto action by the opposition-controlled Upper House.

But Fukushima said the SDP will not shut the door completely if the DPJ is willing to change its mind.

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