Tokyo governor to quit, contest election with new party TOKYO (Reuters) - Tokyo Governor Shintaro Ishihara, whose failed bid to buy disputed islands ignited a crisis with China, said on Thursday he was resigning to form a party with the apparent aim of becoming a "third force" in an upcoming general election. Ishihara's return to national politics creates further uncertainty about the election, which must be held by next August but could take place early next year. He could also complicate strained relations with China. "I've decided to resign as Tokyo governor as of today due to various circumstances," Ishihara, 80, told a news conference. I'm thinking about returning to parliament by forming a new party with my allies. Ishihara, a writer turned politician, announced in April a plan to buy from their private Japanese owners disputed East China Sea islets claimed by both Japan and China. That prompted a counter-bid from the central government, which nationalized the islands in September. By buying the islands, the Japanese government sought to avert a deeper crisis with China but the plan backfired, triggering violent protests in China and calls for a boycott of Japanese goods. Japanese firms scaled back sales, production and investment in China, which is Japan's top export market. Analysts said Ishihara's island gambit had already made major political forces harden their positions on China. If you look in terms of what he wanted to accomplish last April, he succeeded immensely. He provoked a dispute and shifted discourse to the right," said Jeffrey Kingston of Temple University's Japan campus. I don't think he can become premier, but he can become a real irksome presence in the central government, in parliament. His new party could create a "third force" in the election race, possibly in alliance with the nationalist mayor of Osaka, Toru Hashimoto. Hashimoto, 43, also wants to break onto the national stage. Polls show the main opposition Liberal Democratic Party (LDP) well ahead of the ruling Democrats and on course to regain power it lost three years ago after half a century of nearly uninterrupted LDP rule. Both Ishihara and Hashimoto want to score well enough to become coalition partners, analysts said, should the LDP fall short of a majority. But big egos and generational differences may get in the way. Ishihara suggested he wanted to rally several smaller parties around the group he planned to launch. Waseda University professor Tetsuro Kato was skeptical. "It's not going to be like Ishihara becoming the axis around which all the other secondary parties get together," he said. Though popular in Tokyo, where he was elected to a fourth term a year ago, Ishihara remains a divisive figure, admired by many for his rare blunt style, but unpalatable for others because of his tendency to offend. Last year, he was forced to apologize for suggesting that a devastating March 11 earthquake and tsunami were "divine punishment" for the "egoism" of the Japanese people. He has also advocated changing Japan's pacifist constitution and developing nuclear weapons as a deterrent, citing potential threats from China and North Korea. Ishihara rose to prominence in his 20s as a novelist and entered politics in the late 1960s. In 1989, he made waves with his book "The Japan That Can Say No," co-authored with Sony chairman Akio Morita and calling for Japan to become more assertive with the United States. Additional reporting by Linda Sieg; Editing by Ron Popeski