Japan PM, opposition to meet again over stalemate

TOKYO, Nov 2 (Reuters) Japan's prime minister was to meet the main opposition leader today to discuss a deadlock that has halted a refuelling mission in support of US-led operations in Afghanistan -- and threatens to stall other policies as well.

The meeting between Prime Minister Yasuo Fukuda and Democratic Party leader Ichiro Ozawa -- their second this week -- has sparked speculation that the pair are plotting a ''grand coalition'' to resolve a stalemate created when the Democrats and their allies won a majority in parliament's upper house in July.

Forging an alliance would be tough and on the surface the Democrats, who could have their best chance ever of taking power in the next general election, appear to have little to gain.

But Ozawa, a veteran strategist with a reputation for backroom deals and who bolted the long-ruling Liberal Democratic Party (LDP) in 1993, has done surprising turnabouts before.

''All we can do is wait for the results of this meeting,'' said Yasunori Sone, a political science professor at Keio University.

''They need to send a message that they have found an exit strategy (from the deadlock), but we don't know what that could be.'' Financial market players were mostly blase about the political manoeuvring, concerned instead with a fresh wave of credit worries that drove down stocks in Wall Street and Tokyo.

''If the talk (of a grand coalition) actually came close to something concrete, it might become a factor for the market,'' said Takahiko Murai, general manager of equities at Nozomi Securities.

''But at this point, people are much more concerned about the situation of overseas financial institutions than domestic politics.'' Fukuda was to meet Akihiro Ota, head of the Buddhist-backed New Komeito -- the LDP's junior coalition partner -- before his tete-a-tete with Ozawa from 1130 hrs IST.

AFGHAN MISSION The political summit comes one day after Japan called its ships home from the Indian Ocean, where they had provided free fuel for US and other ships patrolling for drug runners, gun smugglers and suspected terrorists.

A law enabling the naval mission expired at midnight yesterday 2030 hrs IST, and with opposition parties, now in control of parliament's upper house, vowing to vote against a new bill, the activities will now be halted for months if not longer.

Under pressure from the United States, Fukuda wants to at least show he is trying hard before a meeting with US President George W.

Bush that media say is likely to take place in Washington on November 16.

''Naturally, since the special anti-terrorism law expired yesterday, that will surely be a topic of discussion,'' Chief Cabinet Secretary Nobutaka Machimura told a news conference.

The meeting has also sparked rumours about a snap election for parliament's lower house as early as December.

No election need be held until late 2009, but pundits are predicting that the political deadlock will force an early poll, most likely after the national budget is enacted in late March.

Ozawa yesterday repeated his opposition to the naval mission, which he says lacks a formal United Nations mandate.

But he was quoted by media as saying he would be willing consider new legislation outlining conditions under which troops could be sent overseas without requiring an ad hoc law each time.

Fukuda told reporters on Tuesday that such a proposal could be discussed, but the two sides have starkly different positions on the possible content, so reaching agreement would be tough.

Japan's military is constrained by its pacifist constitution, and overseas dispatches are always controversial. Public opinion is divided over the Indian Ocean mission.

Reuters SZ DB0929