While Asia has become more resilient due to its economic
management since the region’s own financial crisis in 1997/98,
it is not immune to Europe’s problems, Noda said.

“I don’t think Asia is necessarily vulnerable to external
shocks (from Europe),” Noda told a news conference after the
East Asia Summit on the Indonesian resort island of Bali.

“Given efforts to conduct sound economic policy, the region
generally enjoys a current account surplus and its foreign
reserves are at high levels, so it has become more resilient to
external shocks.”

“Having said that, there is no doubt that we could face
adverse impact if we cannot build a firewall against the
European crisis.”

Policymakers around the world are worried that Europe’s
inability to unify around a debt strategy could hurt their
economies.

Greece, Ireland and Portugal – all small, peripheral euro
zone economies – have already been forced to accept EU/IMF
bailouts as they can no longer afford to borrow commercially.

Now Italy’s borrowing costs have reached unsustainable
levels, while Spain’s are nearing this point and the crisis is
even starting to affect triple-A rated France.

While giving no details on what kind of further steps Asia
should take, Noda said boosting regional financial cooperation
is basically the way to go as Asia tries to prepare itself for
possible meltdowns in Europe.

Japan, China and South Korea lead a $120 billion emergency
fund, under the so-called the Chiang Mai Initiative, with the
10-member Association of South East Asian Nations (ASEAN) – part
of a move to strengthen ties and avert the repeat of the
1997-1998 Asian financial crisis.

In a move to beef up its foreign exchange defences in the
wake of global uncertainties, South Korea last month signed an
agreement with China to double the value of their bilateral
currency swap pact after securing a similar deal with Japan.

In addition to such efforts, Asia needs further crisis
prevention measures, Noda said.

“Japan is leading discussions on how to prevent crisis and
on introducing further steps to avert crisis at a regional
level. We need to quickly wrap up those and I proposed that at
the summit of ASEAN+3 (ASEAN plus China, Japan and South
Korea).”

However, Japan also urged Myanmar to release more political prisoners to continue a series of changes since the army nominally handed over power in March to civilians after the first elections in two decades.

Japan froze new official development assistance (ODA) to the country in 2003, while continuing humanitarian aid. In June, it lifted its ban on new ODA, but has fallen short of resuming full-fledged aid for infrastructure projects.

At a bilateral meeting with President Thein Sein in Indonesia, Prime Minister Yoshihiko Noda welcomed Myanmar’s recent reforms toward democracy, including Friday’s decision by the party of democracy leader Aung San Suu Kyi to contest upcoming by-elections.

“At the same time, Prime Minister Noda expressed hope for the release of more political prisoners (in Myanmar),” Deputy Chief Cabinet Secretary Tsuyoshi Saito told reporters.

Japan has distanced itself from the policy of Western powers, which have imposed tough sanctions on Myanmar, and from that of China, which has pumped billions of dollars into the country. It prefers engagement and dialogue to push for democracy in the country.

President Thein Sein told Noda that Myanmar hoped for Japan’s ODA assistance for infrastructure projects, but Japan’s premier stopped short of promising specific aid at the summit, he added.

Recent overtures by Myanmar’s new civilian government have included calls for peace with ethnic minority groups and the release of about 230 political prisoners and reaching out to Suu Kyi, a Nobel Peace Prize laureate freed last year from 15 years of detention.

(Reporting by Yoko Nishikawa)

Japan, worried about its declining regional and global role, wants to deepen ties with the Association of South East Asian Nations (ASEAN) as China, which surpassed Japan as the world’s No.2 economy, becomes a vital player in the region.

At a summit with leaders from the 10-member ASEAN, Prime Minister Yoshihiko Noda offered support for 33 flagship infrastructure projects in Southeast Asia, using government aid and credit as well as private-sector finances, a Japanese foreign ministry official told reporters.

“It will create some 2 trillion yen ($25 billion) worth of business opportunities,” the official said.

The move comes as China, which separately held a meeting with ASEAN leaders on Friday, offered $10 billion in loans to the regional grouping.

The Japan-ASEAN summit took place ahead of the East Asia Summit (EAS), which brings together ASEAN leaders and eight dialogue partners — Japan, China, South Korea, Australia, New Zealand, India, the United States and Russia, on the Indonesian resort island of Bali.

Maritime security will be front and center when the EAS leaders meet on Saturday, with territorial disputes in the South China Sea — a crucial shipping lane believed to contain valuable oil and minerals — at the heart of tensions.

Beijing wants to resolve the dispute through bilateral negotiations but other claimants — Vietnam, the Philippines, Taiwan, Malaysia and Brunei — prefer a multilateral approach, which opens the way for an indirect role for the United States.

Chinese Premier Wen Jiabao said on Friday that “outside forces” had no excuse to get involved, offering a veiled warning to the United States and others not to stick their noses into the sensitive issue.

MULTILATERAL EFFORTS

In a move that could put pressure on China, Noda proposed holding a multilateral conference on maritime cooperation, which will be open to EAS government officials as well as private-sector experts.

In a joint declaration for enhancing their strategic partnership, Japan and Southeast Asian leaders also said they would “promote and deepen ASEAN-Japan cooperation on maritime security and maritime safety in the region in accordance with universally-agreed principles of international law.”

Crude oil from the Middle East is shipped through the South China Sea to Japan.

But the Japanese official said Tokyo has no intention to interfere with the South China Sea conflict and called for efforts to resolve the dispute.

“We believe it is important that they seek a peaceful resolution in a transparent matter based on international law.”

As China grows in confidence and military power, Tokyo has recently boosted defense cooperation with Southeast Asia.

In September, Japan agreed with the Philippines to strengthen ties between their coast guards and naval forces, while in October it agreed to boost defense cooperation with Vietnam.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. ($1 = 76.9850 Japanese yen)

(Editing by Sanjeev Miglani)

The United States and Europe have applauded a recent freeing of political prisoners in Myanmar but say they want more reforms before considering lifting sanctions imposed in response to decades of human rights abuses in the former British colony, also known as Burma.

Thai Foreign Minister Surapong Towijakchaiku told Reuters in an interview that he was “quite confident” that the resource-rich country would stick to reform efforts and intended to bring the country “back to normal.”

“They should ease sanctions they have done in the past,” he said when asked if Thailand believed the United States and Europe should relax their sanctions.

In his first remarks about the authoritarian regime after the Southeast Asian nation released political prisoners, U.S. President Barack Obama said on Thursday that Myanmar had opened a dialogue on reform but needed to do more to improve human rights.

On the Indonesian resort island of Bali, the 10-member Association of South East Asian Nations (ASEAN) on Thursday endorsed Myanmar for the chairmanship of its regional grouping in 2014, gambling that the country can stick to reforms begun this year that could lead it out of half a century of isolation.

“They (Myanmar) want to enhance economic growth and they would like to see political stability in their country,” Surapong said.

“I don’t think they will reverse the decision (on reforms),” Surapong said, adding that he expected Myanmar to release more prisoners soon. “You have to keep confidence and trust in what they are trying to do.”

Surapong said he expected Washington to honor ASEAN’s decision to let Myanmar host its gatherings in 2014, two years ahead of schedule.

ASEAN leaders are set to meet with dialogue partners, including China, Japan and South Korea (ASEAN+3) on Friday and then convene an East Asia summit with more partners namely Australia, India, New Zealand, and new members — the United States and Russia, on Saturday.

The role of the United States in Asia is in the spotlight at the East Asia Summit as Obama, the first American president to attend the EAS, pushes to reassert his country as a Pacific power.

The growing rivalry between Washington, the Pacific’s traditional military power, and Beijing, its economic engine, could complicate a delicate balancing act played by Asia’s smaller nations.

Asked about recent signs of U.S. assertiveness on security and trade issues in the Asian region, Surapong said ASEAN would need to have a balancing act between “new friends like the United States and old friend China.”

“We don’t want them to compete with each other.”

(Editing by Neil Fullick)

The squabbling will likely further hamper efforts by Kan, who took office a year ago as Japan’s fifth premier in as many years, to tackle steps needed to rein in massive public debt while engineering growth in the fast-aging country.

Kan survived the no-confidence motion on Thursday after a last-minute offer to resign persuaded party critics not to defect and drive him from office even as the country struggles with the world’s worst nuclear crisis in 25 years.

The maneuver appeared to buy Kan time to prepare an extra budget to pay for rebuilding from the devastating March 11 earthquake and tsunami that triggered the crisis at Tokyo Electric Power Co’s Fukushima Daichi plant.

But bickering quickly resurfaced after Kan’s comments at a late-night news conference suggested he wanted to stay on until damaged reactors at the crippled nuclear atomic plant achieved a stable “cold shutdown,” a process expected to take at least until January and probably longer.

“If he cannot keep his promise, he is a fraud,” Kyodo news agency quoted former minister Yukio Hatoyama, who brokered Thursday’s last-minute pact with Kan, as telling reporters.

“If he doesn’t keep his word, I will take decisive action.”

Hatoyama told reporters on Thursday that Kan had agreed to quit after drafting the extra budget, a process he said could be finished this month.

The main opposition Liberal Democratic Party (LDP), which has charged that Kan was incapable of dealing with the nuclear accident and of leading the effort to rebuild Japan’s tsunami-devastated northeast, also weighed in.

“He has broken his promise. It is inappropriate for him to cling to power having expressed his intention to resign,” Kyodo quoted LDP president Sadakazu Tanigaki as saying.

“We cannot cooperate with a lame-duck government.”

Opposition parties, which control parliament’s upper house and can block bills, have insisted that Kan step down before they will cooperate on implementing policies.

Kan’s rivals in the DPJ, which swept to power in 2009 for the first time promising change, have been angered by his abrasive style and fear his low voter ratings would hurt them at the next general election, which must be held by 2013.

Many are also irked by Kan’s shift toward fiscal reform and away from costly campaign promises to spend more on households.

(Editing by Nick Macfie)

Kan’s offer to step down, probably in the autumn, buys him time to prepare an extra budget to fund the rebuilding cost of the March 11 earthquake and tsunami, but it does nothing to resolve the country’s political and policy paralysis.

Thanks to Kan’s manoeuvring, the parliamentary no-confidence motion — brought by the opposition over his handling of the country’s deepest crisis since World War Two — was comfortably defeated by 293 to 152 votes.

However, weakened by rifts within his own party, Kan may be seen as a lame duck by an emboldened opposition and will likely struggle to make much progress on tax and social security reforms needed to contain the nation’s bulging debt.

“There is no change in the sense that political uncertainty still exists,” said Seiji Adachi, senior economist at Deutsche Securities in Tokyo.

“But at least the worst case scenario has been avoided. If the no-confidence motion had passed it would have created a political vacuum capable of significantly delaying post-disaster reconstruction.

Speaking shortly before the vote, Kan told ruling Democratic Party of Japan (DPJ) lawmakers he would step down later.

“I would like for the younger generation to take over various responsibilities once I fulfill certain roles that I need to, as I work on handling the disaster,” a solemn Kan told the gathering.

Some ruling party rebels, fearing Kan’s dismal ratings were hurting their chances of re-election, had said they wanted him out sooner and threatened to side with the opposition.

The prime minister’s offer helped him win back the support of several potential rebels, including his predecessor, Yukio Hatoyama, and members of a group led by party powerbroker and Kan rival Ichiro Ozawa.

Japanese voters are likely to welcome the deal since a majority want Kan to leave, but not in the middle of a crisis.

Kan did not say when he might resign, but Hatoyama suggested that could happen once the outlook for an extra budget to fund rebuilding from the tsunami was clear, which would probably be around August or September.

Kan, who took office almost exactly a year ago as Japan’s fifth minister in as many years, is battling to control a radiation crisis at the Fukushima plant which was knocked out by the tsunami.

He also needs to come up with a solution to pay for rebuilding the tsunami-hit region north of Tokyo, and prepare tax reforms to pay for rising social security costs.

The uncertain outlook has kept financial markets on edge. Lead 10-year Japanese government bond futures rose above 141.17 to a six-month high after Kan hinted he may step down on hopes that it would allow for a smooth transfer of power and prevent political turmoil.

But the breathing space for Kan probably dampens short-term prospects for a “grand coalition” between the Democrats and their biggest rival, the Liberal Democratic Party (LDP), disappointing those who had hoped a new grouping could break a policy logjam in the country’s fractured parliament.

(Additional reporting by Tokyo bureau, Writing by Linda Sieg and Tomasz Janowski, editing by John Chalmers)

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. (0400 GMT), with the vote expected around 3 p.m. (0600 GMT) 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 (612 billion pounds) budget for the fiscal year already begun in April.

It is also trying to finalise 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)

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

Adding to the pressure on Kan, 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 issues related to Japan’s earthquake-triggered crises, Kyodo news reported.

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 ET on Wednesday), with the vote expected around 3 p.m. (2 a.m. ET) 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)

Japan’s fifth premier in as many years, Kan has come under fire for his handling of the nuclear crisis triggered by the March 11 earthquake, the world’s worst in quarter of a century.

The Democratic Party of Japan (DPJ) rebels lining up against Kan also resent what they see as his high-handed style and fear his unpopularity and a policy shift toward fiscal reform could scuttle their chances if the opposition forces an election.

The opposition will need the votes of more than 70 DPJ lawmakers to win the no-confidence motion in the lower house of parliament on Thursday, a target many analysts said it was unlikely to achieve.

However, independent analyst Minoru Morita said the tide was running against the premier.

“The number of DPJ rebels is growing,” he said.

NHK television said Kan’s predecessor, Yukio Hatoyama, intended to vote for the motion. Hatoyama was joined by scandal-tainted party powerbroker Ichiro Ozawa, the prime minister’s main rival in the DPJ.

“A strong government and a strong leader are needed in the time of a crisis,” Ozawa said after the meeting of DPJ lawmakers close to him.

“I’m certain our intention will prevail in parliament.”

Both Hatoyama and Ozawa head large groups of lawmakers in the DPJ.

“The question is whether Hatoyama’s group will all follow him,” said Sophia University professor Koichi Nakano.

Even if Kan does scrape through, analysts said it will be an uphill struggle to win support for major policies, including funding steps for an extra budget to pay for the massive rebuilding costs after the earthquake and devastating tsunami it triggered.

An Ozawa ally earlier told Reuters the rebels could have enough votes to adopt the motion, which would force Kan to resign or call a snap election.

Kan has refused to quit, saying he needs to continue his work to help resolve the crisis over radiation leakage at the earthquake-crippled Fukushima nuclear plant.

Critics within his party want Kan to quit before the no-confidence vote to clear the way for a new leader who could form a coalition with the main opposition Liberal Democratic Party (LDP) to break a legislation logjam in parliament.

“I think at the moment we have enough votes and that it’s more likely that the motion will pass,” Ozawa ally Kenko Matsuki told Reuters. “But we want to find a way until the very end for Mr. Kan to take the decisive step, to resign on his own, so that we can prevent that from happening.”

Five Ozawa allies handed in letters of resignation from their junior cabinet posts on Wednesday to vote against Kan.

OLIVE BRANCH

The Asahi newspaper said more than 50 backers of Ozawa, who has been charged over a funding scandal, would support the no-confidence motion.

That would be short of the more than 70 DPJ votes needed to secure passage of the motion in the 480-member lower house, where the Democrats have 305 seats, but the numbers against him could swell if large numbers of Hatoyama’s group follow suit.

Also, the Japanese Communist Party and the Social Democratic Party plan to abstain from the vote, media said, lowering the number of votes needed to pass the motion against Kan.

Kan, who took office last June, is not only grappling with the crisis at Tokyo Electric Power Co’s atomic plant. He must also find ways to fund rebuilding in the northeast region devastated by the tsunami and craft tax reforms to pay for rising social security costs.

The United Nation’s nuclear power agency, the IAEA, criticised Japan’s reaction to the crisis in a report on Wednesday, saying officials had underestimated the risks.

In a parliamentary debate with LDP leader Sadakazu Tanigaki — off to an inauspicious start when Kan referred to his rival as “premier” — Kan urged the opposition party to cooperate in the national crisis. Tanigaki replied that the prime minister would have to quit first.

“For the sake of rebuilding Japan, first, we must change leaders,” Tanigaki said. “If you quit, we can create all sorts of new formats that supersede party lines.”

The premier held out an olive branch by suggesting a parliament session set to end on June 22 could be extended — something his critics have demanded to discuss a second extra budget to fund the next phase of rebuilding from the tsunami.

The reconstruction project will be Japan’s biggest such endeavour since the years that followed 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.

Kan’s cabinet is, in addition, 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.

(Additional reporting by Kiyoshi Takenaka; Editing by John Chalmers and Sanjeev Miglani)

Japan’s fifth premier in as many years, Kan has struggled to deal with the world’s worst nuclear crisis in 25 years and to push through policies to resolve deep-seated economic woes, with one ratings agency saying the intense political feuding could help force a downgrade in the country’s sovereign debt.

The opposition is expected to vote on the no-confidence motion in parliament’s lower house on Thursday and would need the backing of around 70 lawmakers from the ruling Democratic Party of Japan (DPJ) to succeed, something many analysts said looked too much of a stretch.

But independent analyst Minoru Morita said the tide was running against the premier.

“The number of DPJ rebels is growing,” he said.

Even if Kan does scrape through, analysts said it would still be an uphill struggle to win support for major policies, including funding steps for an extra budget to pay for the massive rebuilding costs after the March 11 earthquake and tsunami.

NHK public TV said scandal-tainted powerbroker Ichiro Ozawa, the prime minister’s main rival in the DPJ, intended to vote for the motion. And an Ozawa ally told Reuters the rebels could have enough votes to adopt it, which would force Kan to resign or call a snap lower house election.

Kan has refused to quit, saying he needs to continue his work to help resolve the nuclear crisis. But he has not ruled out an election even though a growing number of voters would like him to step down, although not necessarily right now.

Critics within his party want Kan to quit before the no-confidence vote to clear the way for a new leader who could form a coalition with the main opposition Liberal Democratic Party (LDP) to break a parliamentary logjam.

“I think at the moment we have enough votes and that it’s more likely that the motion will pass,” Ozawa ally, Kenko Matsuki, told Reuters.

“But we want to find a way until the very end for Mr. Kan to take the decisive step, to resign on his own, so that we can prevent that from happening.”

Media said two Ozawa allies were set to resign their junior cabinet posts to vote against Kan.

OLIVE BRANCH

The Asahi newspaper said more than 50 backers of Ozawa, who has been charged over a funding scandal, would support the no-confidence motion.

That is short of the more than 70 DPJ votes needed to secure passage of the motion in the 480-member lower house, where the Democrats have 305 seats.

Kan, who took office last June, is struggling to control the crisis at Tokyo Electric Power Co’s Fukushima atomic plant, pay for rebuilding the northeast region devastated by the tsunami, and craft tax reforms to pay for rising social security costs.

The U.N.’s nuclear power agency, the IAEA, criticized Japan’s reaction to the crisis, saying officials underestimated the risks.

In a parliamentary debate with LDP leader Sadakazu Tanigaki — off to an inauspicious start when Kan referred to his rival as “premier” — Kan urged the LDP to cooperate in the national crisis. Tanigaki replied that the prime minister would have to quit first.

“For the sake of rebuilding Japan, first, we must change leaders,” Tanigaki said. “If you quit, we can create all sorts of new formats that supersede party lines.”

The premier held out an olive branch by suggesting a parliament session set to end on June 22 could be extended — something his critics have demanded to discuss a second extra budget to fund the next phase of rebuilding from the tsunami.

The reconstruction project will be Japan’s biggest such endeavor since the early post-World War Two era.

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.

Kan’s cabinet is, in addition, 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.

(Additional reporting by Yoko Nishikawa; Editing by Jonathan Thatcher)