By Yoko Kubota
TOKYO (Reuters) - Japanese Prime Minister Naoto Kan and powerbroker Ichiro Ozawa were making their final efforts on Monday to woo undecided lawmakers a day before a cliff-hanger ruling party leadership vote that may set fiscal priorities.
The winner faces the task of keeping a split Democratic Party of Japan (DPJ) from unravelling while struggling with a strong yen, a fragile economy, huge public debt and a divided parliament that threatens more policy deadlock.
Kan, 63, has vowed to cap spending and borrowing and debate a possible sales tax rise in an effort to rein in public debt that is already twice the size of Japan's $5 trillion economy.
Ozawa wants to keep spending pledges made last year before the DPJ swept to power for the first time, and has said he would consider more borrowing to fund stimulus if the economy falters.
But it remains unclear whether the 68-year-old strategist, whose future is clouded by a funding scandal, could survive a possible opposition campaign to stall parliament if he becomes prime minister. The winner of the party vote is likely to become premier because of the DPJ's majority in the lower house.
Media reports say that Kan has secured more votes than Ozawa from local lawmakers as well as party members and supporters who needed to submit their votes by Saturday, while running neck-and neck among members of parliament, whose votes carry more weight.
OZAWA UNPOPULAR
Ozawa is unpopular with most voters, put off by his image as a wheeler dealer. Critics question whether his economic policies would help escape decades of stagnation.
"Ozawa is too much of a poster boy for everything that is wrong with 20th century Japanese politics," said Jeffrey Kingston, director of Asian studies at Temple University's Tokyo campus. "He represents politics as usual."
The leadership poll is based on a point system and those eligible to vote are the 411 Democratic members of parliament, local Democratic lawmakers and party members and supporters.
In hopes of swaying some 30 members of parliament who are still undecided, Kan will focus on Monday on preparing a speech for the party election, while Ozawa will visit lawmakers and interest groups, public broadcaster NHK said.
About half the respondents to a Reuters poll last week said a Kan victory would be neutral for stocks, bonds and the yen.
An Ozawa win would probably give stocks a short-term boost while weakening government bonds and the yen, but many market players fear his pro-spending policies would ultimately backfire.
(Additional reporting by Linda Sieg; Editing by Tomasz Janowski)
