SCENARIOS-Japan's unpopular PM wrestles with election timing

TOKYO, Jan 6 (Reuters) - Unpopular, saddled with a deepening recession and plagued by an emboldened opposition, Japanese Prime Minister Taro Aso could be leading the long-ruling Liberal Democrats to defeat in elections due this year.

Below are some scenarios for how the political story could play out over coming months.

ASO'S BEST BET?

Aso has all but ruled out an early snap election, saying that passing a supplementary budget for the current fiscal year to March 31 and the budget for 2009/10 must come first.

Analysts say he hopes to push the budgets and bills needed to implement the spending through parliament despite anticipated delaying tactics by opposition parties, which control the upper house, and then call an election in late April or May.

Budgets automatically become law 30 days after approval by the lower house even without a vote by the upper chamber, but related bills, if rejected there, would need to be approved by a two-thirds majority of the lower house to take effect.

Aso's Liberal Democratic Party (LDP) and its junior coalition partner, the New Komeito, currently hold two-thirds of the lower house's 480 seats, so if Aso can control internal squabbling in the LDP and keep the New Komeito on board, the budget bills can be enacted, clearing the way for him to call the election.

INDECISION AND DELAY

Even if Aso manages to get the budget bills passed, he might decide not to call an election if his support rates, now below 20 percent, have not recovered to at least 30 percent.

In that case, he -- or his successor, if the LDP opts to replace him before an election -- might wait until closer to the expiry of lower house lawmakers' four-year terms on Sept. 10.

Typically, an election must be held within 30 days of the next-to-last day of the term, so in this case the election date would fall between Aug. 11-Sept.9. If, however, the premier opts to dissolve the lower house on the last day of the lawmakers' terms, the poll could be held as late as Oct. 20.

ELECTION DEAL

Aso's grip over the LDP, which has only had one very brief spell out of power in its 53-year history, is declining in tandem with his sagging popularity.

One high-profile LDP lawmaker, former financial services minister Yoshimi Watanabe, has threatened to leave the party if his demands, including the withdrawal of an unpopular plan for 2 trillion yen ($21.5 billion) in payouts to individuals, are not met. Funding for the payouts is in the extra budget for 2009/10 that Aso wants to get through the lower house by mid-January.

If 17 or more ruling party lawmakers vote with the opposition against bills needed to implement the budget, the ruling bloc would fall short of the two-thirds majority needed to enact them, the LDP would effectively split, and Aso might have to resign.

At present, analysts doubt that so many LDP lawmakers are ready to bolt, but the situation could change by the time a second lower house vote on budget-related bills must be held, probably in February, or when similar action is needed for the 2009/10 budget, most likely in late March or early April.

To avoid that worst-case scenario, Aso might do a deal under which opposition parties agree to help pass the budget-related bills, possibly with revisions, in return for a promise by the prime minister to call an election immediately thereafter.

ELECTION OUTCOME, POLICY IMPACT

Whenever the election is held, analysts and politicians say the LDP-led coalition is sure to lose its two-thirds majority in the lower house. Even if the ruling bloc keeps its simple majority, opposition control of the upper house means the policy deadlock would worsen. The LDP would likely try to woo members from the main opposition Democratic Party, kicking off a possible realignment of political allegiances in the two major parties.

The Democrats, a mix of former LDP members, ex-socialists and younger conservatives, have a shot at becoming the biggest party in the lower house. But if they fall short of a majority on their own, they would need to try to build a coalition with some combination of smaller opposition parties and LDP rebels, making it potentially harder to reach agreement on policies.

Even if the Democrats win a simple majority, the party has never been tested in power since it was formed in 1998, and critics question its ability to implement policies, especially given divisions among members on economic and security matters.

Others, however, say fundamental similarities in policies favoured by the LDP and the DPJ mean the new government would not have as much trouble governing as critics charge.

($1=93.15 Yen)