UPDATE 1-Japan’s ruling Democrats manoeuvre before picking PM

* Kan seen as front-runner to succeed Hatoyama

* Party heavyweight Ozawa’s backing in focus
(Adds fresh comments, background)

By Yoko Nishikawa

TOKYO, June 3 (BestGrowthStock) – Japanese ruling Democratic Party
lawmakers manoeuvred 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 quit a day earlier ahead of an election.

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 front-runner to succeed Hatoyama, who resigned
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.
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Graphic on Japan voter support: http://r.reuters.com/myv63g
Graphic on voting intentions: http://link.reuters.com/jev83j
For more stories on Japanese politics click [ID:nPOLJP]
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Ozawa, widely seen as pulling the strings behind Hatoyama’s
government, 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.

Still, it was unclear whether a change at the top would
improve the Democrats’ chances in the upcoming election.

Hatoyama became Japan’s fourth straight leader to leave
office after a year or less, reminding voters of previous
governments led by the Liberal Democratic Party, two of whose
leaders threw in the towel after about a year in the job.

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. [ID:nTOE65104R] [ID:nTOE65005A]

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.

The yen was under pressure on Thursday after political
uncertainty in Japan helped push it to a two-week low against the
dollar. Japan’s Nikkei average rose 2.8 percent following a rally
on Wall Street, but the market was watching closely as the ruling
party geared up to pick a new leader.

Foreign Minister Katsuya Okada, who was seen as a potential
candidate, told reporters that he would back Kan, who doubles as
deputy prime minister, as long as Kan seeks to lessen the
influence of Ozawa in a new government.

Shinji Tarutoko, 50, who heads the lower house environment
committee, told his supporters that he would run for the party
head, local news agencies said. But not much is known about his
views on economic policy.

Transport Minister Seiji Maehara, whose name had been floated
by media as a possible successor to Hatoyama, said he would not
run and would instead back Kan.

Japan’s new leader will face a tough task keeping ties with
Washington on track, since Hatoyama’s deal with Washington to
shift a U.S. airbase to northern Okinawa is staunchly opposed by
local residents and will be hard to implement.

Kan, in his role as finance minister, has distanced himself
from the base row, and his views on foreign policy and national
security are less well-known.

A new cabinet is expected to be formed on Friday.

Stock Market Money
(Additional reporting by Kiyoshi Takenaka, Chisa Fujioka and
Linda Sieg; Editing by Hugh Lawson)

UPDATE 1-Japan’s ruling Democrats manoeuvre before picking PM