Japan PM To Offer To Resign In Autumn Or Later: Report

By Linda Sieg and Yoko Nishikawa

TOKYO

(Reuters) - Embattled Japanese Prime Minister Naoto Kan -- in danger of losing a no-confidence vote in parliament on Thursday -- will offer to resign later this year after dealing with a nuclear crisis and other urgent matters related to the massive March earthquake and tsunami, domestic media reported.

Even if Kan -- Japan's fifth premier in as many years -- survives, a growing split within the ruling party would further handicap efforts to push policies through parliament, including politically sensitive tax reforms.

The head of the tiny ruling coalition partner, the People's New Party, urged the unpopular premier to resign once he has extended the current parliament session and taken care of pressing disaster-related issues, and Kyodo news agency said Kan would offer to step down in the autumn or later in a meeting with party lawmakers.

But some rebels in the ruling party want Kan out sooner.

Kan, who took office almost exactly a year ago, is battling to control a radiation crisis at Tokyo Electric Power Co's Fukushima nuclear plant, figure out how to pay for rebuilding the northeast region devastated by the tsunami, and craft tax reforms to pay for rising social security costs.

The opposition needs the backing of around 80 of the 305 lower house members from Kan's Democratic Party of Japan (DPJ) to pass the motion in the 480-seat chamber. Passage of the motion would force Kan to resign or call a snap election.

The DPJ rebels, who dislike his abrasive style and fear he is becoming an electoral liability, want Kan to resign even before the vote to pave the way for a coalition with the opposition to break a parliamentary logjam.

"There has been talk that the prime minister may talk about resigning (at a meeting of DPJ lawmakers ahead of the vote), although I am not sure if he will do so right away," rebel DPJ lawmaker Kenko Matsuki told a TV show.

"In any case, it would be too late."

A lower house session to vote on the motion was to open at 1 p.m. (midnight on Wednesday), with the vote expected around 3 p.m. after speeches for and against the motion.

The uncertain outlook was keeping financial markets on edge.

"The no confidence vote could swing either way and the market appears unsure of the outcome," said Yuji Kameoka, chief currency strategist at Daiwa Securities Capital Markets.

"The yen could be sold momentarily if the vote is approved. Even if the vote is defeated, a large numbers of ruling party defectors could still weigh on the yen against the dollar as it the market could take a more cautious view on the Japanese economy."

POWER VACUUM?

Kan has declined to rule out a snap election, although holding a poll would be tough given the devastation caused by the triple calamities in March.

Kan, already unpopular before the disasters struck, has come under fire for his handling of the world's worst nuclear crisis in 25 years.

But there is no obvious successor in his own party.

Leading the rebellion in the DPJ is party powerbroker Ichiro Ozawa, a political strategist and sometime reformer who is under indictment for suspected misreporting of political donations.

Media speculated that Ozawa and his backers would form a new party if the no-confidence motion is defeated.

Kan's predecessor, Yukio Hatoyama, also said he would back the motion although it was not clear how many in his intraparty group would follow suit.

Kan, seeking to prevent defections, said on Wednesday that a session of parliament set to end on June 22 could be extended, allowing time for a second extra budget to fund the next phase of rebuilding from the tsunami in what is set to be Japan's biggest reconstruction project since post-World War Two.

The government also needs to get parliament to enact a bill enabling the issuance of more bonds to finance 44 percent of the $1 trillion budget for the fiscal year already begun in April.

It is also trying to finalize this month proposals for social security and tax reforms -- including a likely doubling of the 5 percent sales tax in stages by 2015.

Moody's Investors Service said on Tuesday that Japan might not be able to avoid a downgrade of its sovereign debt rating even if it presented a strong reform plan, in part because of concerns over political feuding.

(Editing by Edmund Klamann and Jonathan Thatcher)