May 18 (Bloomberg) -- Katsuya Okada will lead Japan's biggest opposition party in the run-up to July elections, after Ichiro Ozawa declined the job because he missed some payments into the national pension plan.

The Democratic Party of Japan this afternoon approved Okada, 50, at a general meeting. He was the only candidate standing for election. Okada has been secretary general of the opposition force since December 2002.

Ozawa's withdrawal may allow the DPJ to highlight missed pension contributions by Prime Minister Junichiro Koizumi and members of his Cabinet. Still, Okada is not a strong alternative, said author Minoru Morita, a frequent media commentator on Japanese politics as head of Morita Research Institute.

``Okada is much grayer than either Ozawa or (former DPJ leader Naoto) Kan. It could be a tough election for the DPJ,'' Morita said. Okada will probably attack Koizumi on the pension issue at every opportunity, seeking votes in the July election for half the members of the 242-seat upper house of parliament, Morita said.

Ozawa's six years of missed payments coincide those of Koizumi, whose almost seven years of skipped contributions occurred before payments became mandatory in 1986.

Missed pension contributions cost the jobs of both former DPJ head Kan, who had skipped 10 months of payments in 1996, and Yasuo Fukuda, chief spokesman for Koizumi's government. The two politicians' non-payments happened after contributions to the state pension system became obligatory. Six other ministers in Koizumi's Cabinet have also said they failed to make some pension payments.

Perception

``Whether the resignation of Kan and effectively Ozawa will actually help the DPJ bring down Koizumi and his Cabinet is doubtful,'' said James Barber, a political analyst at Barclays Capital Research Japan Ltd. in an e-mail. ``There is also a risk that people will merely perceive Okada's selection as a last-ditch move by a desperate party. This impression wouldn't have been as strong if he had been selected ahead of Ozawa.

Japan's need for pension reform will be a main issue in the July elections, analysts have said. The scandal over missed contributions might derail plans by the ruling Liberal Democratic Party and coalition partner New Komeito to push through a bill raising pension contributions and lowering benefits.

Seventy percent of 1,096 respondents to a weekend survey by the Asahi newspaper said the pension legislation shouldn't be passed by the current parliament.

The DPJ will battle with the LDP in July for half of what will be a 242-seat upper house after the election. The DPJ holds 39 of 121 seats up for grabs.

Under Ozawa and Kan, the DPJ would probably have won more than 50 seats in the July poll, Morita said. Under Okada, the number will more likely be in the mid 40s, he said.

``A poor performance by Okada in the election may prompt Ozawa to seek the party leadership in September'' Morita said.

Okada won a seat in the lower house of parliament in 1990 after a 12-year career as an official at Japan's then Ministry of International Trade and Industry. Okada, who challenged Kan for the DPJ's leadership in December 2002, is the brother of Motoya Okada, president of Aeon Co., Japan's biggest retailer by sales.

To contact the reporter on this story: Lindsay Whipp in Tokyo at lwhipp1@bloomberg.net

Last Updated: May 18, 2004 03:43 EDT