TOKYO: Japan Prime Minister Yukio Hatoyama acknowledged Monday growing public discontent with his centre-left government over funds scandals after a ruling-party candidate lost a weekend gubernatorial race.

The comprehensive election defeat in Nagasaki prefecture came as a newspaper poll found support for Hatoyama's government had nearly halved since it came to power five months ago.

"We cannot deny that the political situation at the national level has affected the outcome. The problems involving politics and money have had consequences," said Hatoyama.

Hatoyama also blamed the bad economy, which he inherited from the previous administration, for the loss. The world's number two economy is limping out of its worst post-war recession but is still hobbled by deflation.

Former Nagasaki vice-governor Hodo Nakamura won a landslide victory over former bureaucrat Tsuyoshi Hashimoto, a candidate backed by the ruling party, in Sunday's election in the southern prefecture.

Nakamura beat Hashimoto by 316,603 votes to 222,565 with backing from the conservative Liberal Democratic Party and the New Komeito party, which were ousted in September by Hatoyama's Democratic Party of Japan (DPJ).

The poll defeat came five months after the DPJ won all four districts in Nagasaki in national lower house elections that ousted the LDP, who had ruled Japan with only one break for more than half a century.

Since then Japan's public has watched a series of DPJ political funds scandals over accounting irregularities that led to the indictment of former aides of Hatoyama and accusations against DPJ heavyweight Ichiro Ozawa.

Prosecutors later dropped their investigation against Ozawa citing insufficient evidence.

The Nagasaki poll, ahead of elections for the national upper house in July, "showed the 'money-and-politics' problems... are taking the DPJ's steam," said the nationwide daily Mainichi Shimbun.

A weekend survey of 2,161 people published in the Asahi Shimbun found public support for Hatoyama's cabinet had fallen to 37 percent from 41 percent only about two weeks ago. The disapproval rate rose to 46 from 45 percent.

The latest reading is nearly half of the 71 percent support rate the Hatoyama cabinet won in the liberal paper's opinion poll immediately after the new government took office in mid-September.