By Linda Sieg and Shinichi Saoshiro
TOKYO (Reuters) - Former Japanese Foreign Minister Seiji Maehara, who has called beating deflation a top priority, is likely to throw his hat in the ring to become the next prime minister, Jiji news agency said on Monday, clouding the chances of Finance Minister Yoshihiko Noda, who had hoped to win Maehara's support.
Unpopular Prime Minister Naoto Kan is expected this week to confirm his intention to resign, clearing the way for Japan to select its sixth prime minister since Junichiro Koizumi ended a rare five-year term in 2006.
Japan's new leader must grapple with a resurgent yen, push ahead with efforts to rebuild from the March earthquake and tsunami and end a radiation crisis at the crippled Fukushima nuclear plant -- all while figuring out how to curb a huge public debt and cure the ills of a fast-aging society.
"Foreign Minister Maehara has begun final coordination in preparation to run," Jiji reported, quoting unidentified party sources.
Noda, a 54-year-old fiscal conservative, had hoped to win the backing of Maehara, 49 -- the most popular of possible candidates among voters in recent polls -- in his push to replace Kan, a once-fiery civic activist whose ratings have slipped well below 20 percent since he took office in 2010.
"This changes the dynamic completely, although it doesn't give you the answer to who will win," Chuo University political science professor Steven Reed said of Maehara's expected decision to run in the Democratic Party (DPJ) leadership race.
At least five other DPJ lawmakers are eyeing a run at the nation's top job in the ruling party race, expected to be held around August 29 after passage of two key bills now before parliament.
The new party leader becomes prime minister by virtue of the party's majority in parliament's powerful lower house.
Whether and when to raise taxes to pay for rebuilding from the March disaster and to fund the bulging social security costs of a fast-aging society will be a focus of the party race, although even Noda has been toning down his stance of favoring raising taxes soon.
Maehara, a former DPJ leader who like Noda has expressed concern about giant rival China's military buildup, topped the list of voters' preferred candidates in a Kyodo news agency survey, with 28 percent against a mere 4.8 percent for Noda.
But political analysts said Maehara's popularity was no guarantee that he would win the DPJ race, in which only DPJ members of parliament and not rank-and-file members take part.
POWERBROKER OZAWA IN SHADOWS
Unless Noda, whose DPJ support base overlaps that of Maehara, bows out of the race, low-profile Agriculture Minister Michihiko Kano, 69, could have a better chance of winning, not least because he may gain backing from party powerbroker Ichiro Ozawa and his ally, former premier Yukio Hatoyama.
Kano's lack of a clear policy stance on key issues also makes it easier to get support from various quarters inside the Democratic Party, which like its main rival the Liberal Democrats is split over economic and foreign policy matters.
"Because Kano lacks policies, he doesn't have enemies," DPJ elder Kozo Watanabe told Reuters in an interview on Friday.
Ozawa, a former party leader who some credit with engineering the Democrats' sweep to power in 2009, cannot himself run because his DPJ membership was suspended after he was indicted on suspicion of misreporting political donations.
"Ozawa and Hatoyama will join together and that could decide the outcome," said independent political commentator Hirotaka Futatsuki. "But the situation is fluid. It's not impossible that Noda and Maehara will decide that only one of them will run."
Kan and his four short-lived predecessors have all struggled to implement policies in the face of a divided parliament, where the opposition controls the upper house and can block bills.
Prospects for a "grand coalition" with the opposition that could break the deadlock appear dim, however, after the head of the main opposition Liberal Democratic Party (LDP), Sadakazu Tanigaki, repeated on Sunday that any such tie-up would be very exceptional.
The LDP and No.2 opposition party the New Komeito are expected, however, to cooperate in enacting a third extra budget in the autumn to fund reconstruction from the March disaster, with spending likely to total over 10 trillion yen ($131 billion).
($1 = 76.245 Japanese Yen)
(Editing by Nick Macfie)