By Linda Sieg
TOKYO, April 14 (Reuters) - Japan has unveiled a record 15.4 trillion yen ($154 billion) stimulus package to try to rescue its economy from recession, but bills needed to implement the steps could face a rocky ride in parliament, where the opposition controls the upper house and can delay bills.
Opposition Democratic Party leader Ichiro Ozawa on Tuesday criticised the package as pork-barrel steps that would not ease public concern about the future, but did not clarify how his party would deal with the legislation in parliament.
Prime Minister Taro Aso, whose support rating rose to 30 percent in one recent poll due to a funding scandal plaguing his main opposition rival and to the unveiling of the package, has threatened to call a snap election if the opposition dithers over the legislation.
The Democratic Party of Japan (DPJ) had looked set to win the election, which must be held by October, until a close aide to Ozawa was charged last month will illegal fundraising. Surveys now suggest the election may result in a virtual draw, prolonging Japan's political stalemate and hampering policy.
Following are scenarios for the fate of the budget bills, which are expected to be submitted to the lower house on April 27, as well as the timing of an election and policy implications.
OPPOSITION PLAYS HARDBALL (UNLIKELY)
The DPJ could take a combative stance and draw out debate in the upper house, refusing to call a vote while criticising the government proposals and playing up its alternative policies.
The extra budget would become law 30 days after approval by the ruling bloc-controlled lower house. But bills needed to implement spending, tax cuts and other steps must be approved by the upper chamber. If they are rejected there, the ruling bloc can use its two-thirds lower house majority to override the upper chamber and enact the bills. Legislation is considered to have been rejected in the upper house if 60 days pass without a vote.
A confrontational DPJ stance would force Aso to decide whether to make good on his threat to call a snap election in May or June, or to wait 60 days and use the ruling bloc's two-thirds lower house majority.
Aso, however, would probably be wary of the former option unless his public support rates rise above the 30 percent seen in an opinion poll by NHK public TV released on Monday.
And the Democrats, hit by the funding scandal, are unlikely to risk a voter backlash by opting for full-scale battle and giving Aso an excuse to call an election that they are no longer assured of winning, especially if Ozawa stays in his post.
BUDGET BILLS PASS (LIKELY)
The Democrats could decide to vote down the budget-related bills in the upper house in a timely fashion while touting their own economic policy proposals.
The legislation would then be enacted with a re-vote in the lower chamber, possibly even before the end of May.
This would clear the way for Aso to call an election, but would also deprive him of an excuse for doing so.
That means the prime minister might end up waiting, as many analysts think he would prefer to do, until after attending an early July summit of G8 leaders in Italy.
Despite some calls from within his own ruling Liberal Democratic Party to go to the polls sooner, many pundits think Aso, 68, wants to hang on to his job as long as possible.
MORE POLITICAL DEADLOCK?
Despite the recent ratings rise for Aso's cabinet, the LDP-led coalition is still expected to lose its two-thirds majority in the lower house.
So even if the ruling bloc wins a simple majority to stay in power, policy gridlock could worsen, an outcome that would be viewed most negatively by financial markets hoping for one party to win a decisive victory.
The Democrats may still have a shot at becoming the biggest party in the lower house. While the funding scandal has clouded the outlook for winning a majority, the situation could change again if Ozawa were to quit as party leader.
A Democratic Party administration would not signal a drastic change in economic policies -- both sides want to create jobs and stimulate domestic demand in the export-driven economy.
But the opposition has vowed to reduce bureaucrats' grip on policy-making, reduce wasteful spending and stress consumer and worker rights over corporate interests.
A very narrow gap between the two camps could revive calls for a "grand coalition" linking the LDP and the Democrats, or prompt each camp to try to lure defectors to their side, possibly sparking a major realignment of political allegiances.
But that process would take time and might not result in the clear divide along policy lines that some pundits advocate.