Influential Japanese political figure Ichiro Ozawa was acquitted Thursday on charges of violating fund raising laws, setting up a possible showdown in the country's ruling party.

The Tokyo District Court said there was no evidence that Ozawa knowingly falsified reports to hide a $5 million loan he made to his political fund-raising body to facilitate a land deal in 2004.

The ruling means the 69-year-old power broker, nicknamed the “shadow shogun” for his behind-the-scenes deal-making, could soon be re-instated into the ruling Democratic Party of Japan.

Ozawa has been a vocal critic of Prime Minister Yoshihiko Noda — also a member of the DPJ — and his controversial plan to double the sales tax to address a massive government debt.

Ozawa is widely credited with masterminding the DPJ's historic victory in 2009 over Japan's long-ruling conservative party.

Though the scandal forced Ozawa to step down as head of the DPJ, he has retained a loyal core of supporters. His re-instatement will likely make it more difficult for Prime Minister Noda to pass his plan to double a consumer sales tax to 10 percent by 2015.

Top government spokesman Osamu Fujimura says he hopes Ozawa's acquittal will not hurt the bill's chances of being approved.

“Facing this decision, our response as a government is just to hope for the fastest possible passing of legislation (on raising the consumer sales tax).”

Mr. Noda says the plan is necessary to bring down the country's historic debt and pay for rising social security expenses. But Ozawa says Japan's already fragile economy cannot handle the tax increase.

Prosecutors initially decided not to prosecute Ozawa, but they changed course after a panel of ordinary citizens called for his indictment. Three former aides were convicted last year in connection with the scandal.