DPJ’s Ozawa Acquitted of Japan Campaign Finance Violations

Japanese ruling party powerbroker Ichiro Ozawa was found not guilty of violating campaign finance laws, strengthening his hand in opposing Prime Minister Yoshihiko Noda’s plan to raise the consumption tax.

Ozawa, 69, was cleared of charges that he helped falsify reports from his political fundraising organization over a 400 million-yen ($4.9 million) land purchase, Tokyo District Court spokeswoman Aya Hatakeyama said. While three former aides were convicted on similar charges in September, the court ruled in February that “illegal” interrogation made testimony from one of them inadmissible.

The acquittal further endangers Noda’s bill to double the 5 percent sales tax by 2015 to rein in the world’s largest debt over the objections of opposition lawmakers. Ozawa heads the largest faction within the Democratic Party of Japan and has criticized the tax proposal as burdening the public at a time when the economy is struggling.

“Ozawa is now free to be more vigorous in confronting the Noda government on things like the consumption tax,” said Koichi Nakano, a political science professor at Sophia University in Tokyo. “It means more headaches for Noda. Ozawa has substantial influence over a third or at least a quarter of the party.”

Photographer: Haruyoshi Yamaguchi/Bloomberg

Ichiro Ozawa, former secretary general of the ruling Democratic Party of Japan. Close

Ichiro Ozawa, former secretary general of the ruling Democratic Party of Japan.

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Photographer: Haruyoshi Yamaguchi/Bloomberg

Ichiro Ozawa, former secretary general of the ruling Democratic Party of Japan.

The verdict may send Japanese bond yields up from near an 18-month low on concern the tax plan will fail. Ozawa’s failed DPJ leadership bid in 2010, on a platform of increasing public spending, spurred an increase in yields of almost 30 basis points in a week. Japan’s 10-year note yields were at 0.91 percent today, the least since October 2010 in the weeks after Ozawa’s defeat in the party election.

Noda’s Misfires

Noda’s bid to raise the consumption levy is already hampered by falling popularity and Cabinet misfires. The opposition-controlled upper house censured his defense and transport ministers last week, the second such parliamentary maneuver since the prime minister took office in September.

The move delayed legislation to sell shares of the national postal network to help pay for reconstruction from last year’s earthquake and nuclear disasters.

Just over 50 percent of voters oppose the tax plan, compared with 40 percent who support it, according to an Asahi newspaper poll published April 16. Noda’s approval rating fell two percentage points from March to 25 percent, the survey showed.

Ozawa was the engineer of the DPJ’s 2009 landslide victory that ousted the Liberal Democratic Party after more than a half- century of governance. Since then he has denounced the DPJ’s cutbacks on child-rearing subsidies and supported a no- confidence motion against Naoto Kan, Noda’s predecessor as premier, for his handling of last year’s crisis.

To contact the reporter on this story: John Brinsley in Tokyo at jbrinsley@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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