TOKYO – Rivals to lead Japan's main opposition party promised on Thursday to eliminate wasteful spending and reform the pension system as the party battles to widen its lead ahead of a looming election.

Democratic Party lawmakers will choose a new leader on Saturday after a funding scandal forced Ichiro Ozawa from office.

The change of leadership may revive the group's chances of toppling the conservative Liberal Democratic Party, which has ruled Japan almost unbroken for half a century.

Polls show the Democrats are still ahead among voters before the general election, which must be held by October, although a

wider lead faded after the fundraising scandal erupted.

Yukio Hatoyama, a fourth-generation politician, has taken the lead for the top party post, a survey of lawmakers by the Nikkei business daily showed, despite more voters preferring younger rival Katsuya Okada, the clean-cut son of a supermarket magnate.

I am confident that it has to be me if we want to achieve a change in the government, Okada told a news conference, in which he pledged to reform the bureaucracy and address faults in the pension system.

Hatoyama, blasting the LDP for leaving policy up to bureaucrats and wasting taxpayers' money, said his goals were not much different from Okada's.

There should not be a big difference between our policies, since both of us have worked on policy-making as senior members of the party, Hatoyama told a separate news conference.

But he said given the tough economic environment he was against debating now an increase in the 5 percent sales tax, which economists say is needed to fund ballooning social security costs for a fast-aging society.

Okada said Japan's sales tax will eventually have to be raised from the current 5 percent to finance bulging pension costs, although he is against increasing it in the immediate future as Japan fights its worst recession since World War Two.

If Hatoyama becomes party leader, the sales tax could become an issue in the election, with the LDP likely to charge that he is being irresponsible on fiscal policy by avoiding the issue.

Prime Minister Taro Aso has said the tax should be raised from 2011 if the economy recovers.


The Democrats are trying to woo back voter support after the scandal involving a close Ozawa aide threatened their bid to defeat the unpopular Aso's LDP in the election.

Speculation is simmering that Aso will call an early election for August, but former prime minister Shinzo Abe told Reuters that the election should be in July with promises of more public spending for the weak economy.

In a survey covering four-fifths of Democrat lawmakers, nearly half said they would support Hatoyama while 30 percent said they would vote for Okada, the Nikkei said.

Public opinion polls, however, show the younger Okada more popular among voters. A quarter of respondents to a Mainichi newspaper poll said they wanted Okada to lead the party while 13 percent wanted Hatoyama.

Okada, 55, has a fresher image that appeals to independent voters, while Hatoyama, 62, was the party's No.2 under Ozawa and is considered more capable of managing the sometimes fractious party.

Hatoyama could unify the party, but just unifying the party is not enough to take power, said Keio University professor Yasunori Sone.

Democratic Party lawmakers have until Saturday morning to decide whether to seek the leadership but others appeared unlikely to join the race.

Analysts say the core of the Democrats' platform -- a pledge to break bureaucrats' grip on policy to reduce wasteful spending and end the cosseting of vested interests -- was unlikely to change no matter who leads the party.

Media have cast the vote as a battle between pro-Ozawa and anti-Ozawa forces within the party, but both candidates have denied this and said party unity came first.

Hatoyama said he hoped the outgoing Ozawa, known as a skilled campaign strategist, would still help the party in its bid to oust the LDP from power.

Ozawa, who has denied wrongdoing in the funding scandal, seems unlikely to fade from the political scene.

On Wednesday, he appeared smiling before regional supporters as the theme song from the movie Rocky blared in the background.