* Opposition, scenting victory, keen for early poll
* Election outcome could spell more policy confusion
* Politicians betting on election before year's end
Embattled Japanese Prime Minister Yoshihiko Noda has suggested to his main rival he will call an election for early November, media reported on Thursday, but with the opposition scenting victory it was unclear if he could wait that long.
Noda, who took office last September as Japan's sixth premier in five years, scored a rare policy win this month when parliament enacted a law to double the sales tax to curb public debt. But he had to pledge to call an election "soon" to gain opposition backing to pass the bill in a divided parliament.
Members of Noda's Democratic Party of Japan (DPJ) want to put off an election given their sagging support rates but opposition parties, which control parliament's upper house, can force his hand by blocking a bill to allow fresh bond issuance to fund the budget for the current fiscal year.
Finance Minister Jun Azumi has said that, unless the funding bill passes, the government could run out of money by the end of October. Lower house members' terms run through August 2013, but most politicians are betting on an election before year's end.
Kyodo news agency, citing senior opposition Liberal Democratic Party (LDP) lawmakers, said Noda had indicated in his August meeting with the LDP's leader that he would call an election before compiling a budget for the next fiscal year, suggesting he had Nov.4 or Nov. 11 in mind.
But the LDP has rejected the offer, Kyodo said, adding Noda had also floated the idea of holding an election on Oct. 7.
The Sankei newspaper had a similar report.
"The feeling is growing day by day that we cannot leave the governing of Japan to the Democrats any longer," LDP Vice President Tadamori Oshima told Reuters earlier this month.
The DPJ, a mix of conservatives, centre-left lawmakers and ex-socialists, swept to power in August 2009, pledging to change how Japan is governed after more than 50 years of almost non-stop rule by the conservative LDP.
Three years and three prime ministers later, critics say the Democrats' promises to reduce bureaucrats' control over policymaking and pay more heed to consumers and workers than corporations were honoured mainly in the breach.
The party has also suffered a series of defections over the tax hike plan, and is divided over energy policy as Noda tries to decide what role nuclear power should play amid growing anti-nuclear sentiment after last year's Fukushima atomic disaster.
Politicians and analysts agree that the Democrats now look set for defeat. But it is uncertain whether the LDP and its junior ally, the New Komeito party, can win a majority given the widespread voter dissatisfaction with mainstream parties.
That dissatisfaction is reflected in support for populist Osaka Mayor Toru Hashimoto, whose local Ishin no Kai group hopes to win seats in parliament.
That means the next government could be a weak coalition, spelling more policy confusion as Japan grapples with a stagnant economy, rocky ties with China and South Korea, and declining global competitiveness.
Noda's push to bring the sales tax to 10 percent by 2015 was billed as a test of Japan's resolve to tackle its snowballing debt. That debt tops two years' worth of Japan's economic output, a record among industrialised nations.
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