UPDATE 1-Japan Ozawa:investment could help control yen rise

(Adds Ozawa comments on investment and yen, background)

TOKYO, Sept 3 (Reuters) - Japanese ruling party powerbroker Ichiro Ozawa, challenging Prime Minister Naoto Kan in a party leadership vote, said on Friday that investing in foreign resources could help curb a rapid rise in the yen.

Ozawa would likely become prime minister if he defeats Kan in a Sept. 14 Democratic Party of Japan (DPJ) leadership vote, but a poll by Kyodo news agency showed that the outcome was too close to call.

"The strengthening yen is not necessarily a bad thing for the country," Ozawa said on public broadcaster NHK.

"Actively taking measures such as ... making use of the strong yen and making big investments in resources abroad would be effective in controlling the rapid yen rise." <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For more stories on Japanese politics: [ID:nPOLJP]

Political risks in Japan : r.reuters.com/jyj83n

PDF on DPJ leadership race: r.reuters.com/tad39n

Graphic on PM candidates: link.reuters.com/qak88n

Graphic on Japan public debt: r.reuters.com/sez92m

Graphic on yen strength: r.reuters.com/puw56n ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The battle in the DPJ, which swept to power for the first time a year ago, underscores a rift that could derail Kan's efforts to curb a public debt already twice the size of the $5 trillion economy.

Ozawa has pledged to take bold steps to fix Japan's flagging economy by floating tax cuts. He has also threatened to intervene in currency markets to curb the yen's rapid rise, saying there is limited room for the Bank of Japan alone to stem the strong yen.

Kan has called for debate on a possible sales tax hike to fix the debt hole, but Ozawa has stressed the need to first cut wasteful spending.

Of 412 members of parliament from the DPJ, around 170 supported Ozawa while around 160 backed Kan, Kyodo said. The rest did not respond or were undecided, and the poll did not cover local lawmakers, party members and supporters who will also take part in the vote.

Ozawa heads the biggest group of DPJ lawmakers but his scandal-tainted image puts off much of the public and could affect the vote. (Reporting by Chisa Fujioka and Yoko Kubota; Editing by Edmund Klamann and Alex Richardson)