The 69-year-old former leader of the governing Democratic Party of Japan (DPJ) is accused of overseeing false accounting by his staff.
Three of his former aides were convicted last week over the scandal, which relates to a 2004 land deal.
Mr Ozawa denies any wrongdoing, saying the charges are politically motivated.
The scandal has deeply divided the DPJ, which has been losing public support.
'Shadow shogun'Mr Ozawa went on trial in the Tokyo district court on Thursday.
He was indicted on 31 January for alleged false reporting by his fund management company over the land deal in Tokyo, but he told the court he was not guilty.
Continue reading the main story 2003: Merges Liberal Party with DPJ2006: Becomes DPJ leader2009: Resigns as DPJ leader amid funding scandal, just ahead of landmark poll win2010: Challenges PM Naoto Kan for party leadership but fails2011: Goes on trial over funding scandal"There was no erroneous bookkeeping, and I have never conspired with anyone," he said, calling for his trial to be halted.Mr Ozawa says that he is being unfairly targeted by vested interests opposed to his party's pledge to break the stranglehold of bureaucrats on decision-making and bring politics closer to the people.
A court verdict is expected in April.
Mr Ozawa has been so powerful in Japanese politics that he is known as the "shadow shogun".
He is widely credited with overseeing the DPJ's 2009 election victory, which ended half a century of almost unbroken rule by the Liberal Democratic Party.
But his immense influence in Japanese politics has been eroded by a long investigation into his political fundraising, the BBC's Roland Buerk in Tokyo reports.
This cost him the leadership of the DPJ shortly before the party's election triumph. A year later he went on to challenge former Prime Minister Naoto Kan for the party leadership but lost.
However he continues to lead the DPJ's biggest faction, which has challenged party leaders on several reform pledges.
Analysts say a waning of his influence might lead to greater party stability. Current Prime Minister Yoshihiko Noda is the third since the DPJ's election victory in 2009.
But over a four-decade career of brokering alliances, creating and destroying parties, Mr Ozawa has made many come-backs, so even if he is found guilty few will write him off entirely, our correspondent adds.
He adds that if Mr Ozawa is acquitted, he could challenge Mr Noda in a leadership election due next September.