By Yoko Kubota
TOKYO (Reuters) - Embattled Japanese Prime Minister Naoto Kan promoted a junior cabinet minister to the top foreign affairs portfolio on Wednesday, handing him a long list of challenges including managing strained ties with neighboring China.
State Foreign Secretary Takeaki Matsumoto will take over from pro-U.S. security hawk Seiji Maehara, who abruptly quit on Sunday after admitting he had taken about $3,000 in donations from a Korean national.
"The prime minister made the decision based on his (Matsumoto's) abilities and knowledge, as well as on his diplomatic consistency -- the fact that he has been involved in some important matters as state foreign secretary," Chief Cabinet Secretary Yukio Edano told a news conference.
The resignation of Maehara, once seen as a likely successor to the unpopular Kan if he bows to pressure to quit, was a fresh blow to the premier and his Democratic Party of Japan (DPJ) as they fight to pass bills needed to implement a $1 trillion budget for the year from April in a divided parliament.
With support for the government sinking to around 20 percent, opposition parties have built up pressure for Kan to resign, adding to the political stalemate that has distracted the government from tackling deep-seated problems and crafting policies to curb Japan's massive public debt.
"At a time when Japan needs individuals with strong leadership potential, political leaders across the board in all parties -- left and right -- seem myopically focused on personality politics and short-term political gain," Sheila Smith, a senior fellow for Japan studies at the U.S. Council on Foreign Relations, said in a blog entry.
"Japan desperately needs a forward leaning diplomatic and security strategy. It needs individuals who can advocate internationally on Japan's behalf. And more than ever, it needs strategic thinkers ... But this current frenzy of political ambition is becoming too costly."
Maehara's successor will have to hit the ground running, attending a Group of Eight ministerial meeting in Paris on March 14-15 and a trilateral meeting with his counterparts from China and South Korea later this month.
Matsumoto faces a long list of diplomatic challenges.
Japan's relations with Beijing chilled last year after Japan held a Chinese skipper after his trawler collided with Japanese patrol boats near disputed isles in the East China Sea.
In a sign that ties are still strained, Japan scrambled jets this month after Chinese naval planes flew near the isles, though they did not enter Japan's airspace. Tokyo also complained to Beijing this week after a Chinese helicopter flew close to a Japanese destroyer in the East China Sea.
Tokyo expressed regret on Wednesday after China's leading offshore oil firm said it had been producing oil from a disputed gas field in the East China Sea.
Despite diplomatic tensions, Japan is increasingly dependent on China's economic strength. China has recently surpassed Japan as the world's second-biggest economy and has been Japan's biggest trading partner since 2009.
Toyota Motor Corp President Akio Toyoda said on Wednesday he expected China to account for 15 percent of the car maker's total sales, though he did not give a timeframe.
Ties with Washington, Japan's biggest security ally, was also damaged after the DPJ took power in 2009 and then-premier Yukio Hatoyama tried to keep a campaign pledge to move a U.S. air base off the southern island of Okinawa.
Kan, who took over last June when Hatoyama suddenly quit, has promised to implement a 2006 deal to shift the base to a less populated part of the island, but faces stiff opposition from local residents.
Adding to the difficulties, the head of the Japan affairs office at the U.S. State Department, Kevin Maher, was recently quoted by Kyodo news agency as telling U.S. college students that Okinawans were masters of "manipulation" and "extortion", sparking outrage in Okinawa.
Assistant Secretary of State Kurt Campbell, who arrived in Tokyo on Wednesday, told reporters in Washington the report was inaccurate but apologized for any misunderstandings it caused.
Ties with Russia are also strained after Russian President Dmitry Medvedev last year visited an island that both countries claim. The government's handling of territorial disputes has hurt Kan's support ratings at home.
Japanese media reported on Wednesday that a lawmaker in Kan's ruling party signed a petition in South Korea calling for Japan to stop asserting its sovereignty over islands that both countries claim. Kan told reporters that it was "very regrettable".
Matsumoto, a graduate of the University of Tokyo's faculty of law and a former banker who media say is an expert in defense policy, was policy chief in the DPJ when it was still an opposition party. (Additional reporting by Linda Sieg, Chisa Fujioka; Editing by Yoko Nishikawa)