June 2, 2010 / 12:54 AM / 10 years ago

Japan's ruling Democrats scramble to pick new PM

TOKYO (Reuters) - Japan’s ruling Democratic Party was scrambling on Thursday to pick a new leader, and hence premier, after fiscally conservative Finance Minister Naoto Kan threw his hat in the ring to replace unpopular Prime Minister Yukio Hatoyama, who resigned a day earlier ahead of a looming election.

Japanese Prime Minister Yukio Hatoyama arrives at the parliament for a meeting with his ruling Democratic Party Secretary-General Ichiro Ozawa in Tokyo in this June 1, 2010 file photo. REUTERS/Issei Kato

The Democrats will vote on Friday to pick a new leader, but the political turmoil could delay efforts to thrash out plans set to be announced this month to cut Japan’s bulging public debt and craft a strategy to engineer economic growth in an ageing society.

Kan is the frontrunner to succeed Hatoyama, who quit after just eight months in office, but party powerbroker Ichiro Ozawa will also play a key role in determining if the 63-year-old Kan, a former party leader with considerable clout, gets the job.

Ozawa, widely seen as pulling the strings behind Hatoyama’s government, also quit on Wednesday as party secretary-general, but as the de facto chief of the Democrats’ biggest bloc of lawmakers, his backing could prove key.

That could also affect how aggressively Japan’s new leader tackles the urgent problem of reining in a public debt already twice the size of its economy, since Ozawa is against promising to raise the 5 percent sales tax before an upper house election expected in July.

The Democrats, who swept to power last year in a landslide election victory but whose support has since plummeted, are trying to boost the party’s fortunes in the upper house election that they need to win to pass bills smoothly.

Kan, a former health minister once known for battling bureaucrats, has forged an image as a fiscal conservative and occasional central bank critic since assuming the finance post in January.

That could raise the chances of bolder steps to rein in a public debt already about twice the size of Japan’s GDP, a stance investors and many voters would welcome, although he is hardly a fresh face.

Other possible candidates to succeed Hatoyama, who becomes Japan’s fourth straight leader to leave office after a year or less, include Transport Minister Seiji Maehara and Foreign Minister Katsuya Okada, Japanese media say.

So far, only Kan has expressed his intention to run for party leader. Maehara said he has not decided.

A new cabinet is expected to be formed as early as Friday.

Reporting by Linda Sieg and Yoko Nishikawa; Editing by Chris Gallagher

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