A Japanese court has acquitted ruling party heavyweight Ichiro Ozawa of charges of violating fund-raising law, further complicating Prime Minister Yoshihiko Noda's task of preserving party unity and pushing through his contentious tax hike plan.

Ozawa, once dubbed the "Shadow Shogun", was cleared on Thursday of allegations he conspired with aides to hide 400 million yen ($4.9 million) he lent to his political funding body in 2004 to facilitate a land deal.

His aides said the mistake was purely technical and their boss -- a former Democratic Party of Japan leader who engineered the party's 2009 election victory -- had not been aware of it, while prosecutors said it was "unthinkable" Ozawa had not been in the loop.

Major TV networks cleared their schedules to report the verdict, with a huge media presence at the court for a case that has gripped Japan's political classes for years. A spokesman for the court said 1,843 people queued up for the 46 seats available to the public.

If upheld, the Tokyo district court decision could help the 69-year old leader, who opposes the prime minister's plan to double the sales tax and leads the party's biggest faction, contest the scheme and challenge Noda's leadership.

But analysts said the threat of an early election may prevent Ozawa's backers from revolting against the prime minister, and that the fate of the tax bill rested primarily in the hands of the opposition which controls the parliament's upper house.

Still, bond investors will be watching Ozawa's next steps for any signs that increased infighting among the ruling Democrats could further delay budget reforms necessary to rein in Japan's snowballing debt.