Japan searches for a new prime minister, again

TOKYO (Reuters) - Japan began searching for a new prime minister on Tuesday after Yasuo Fukuda became the second leader to resign in less than a year, threatening a further policy vacuum as the economy teeters on the brink of recession.

Topping the list of likely candidates to become Japan's 11th prime minister in 15 years is former foreign minister Taro Aso, 67, an outspoken nationalist who now holds the No. 2 position in the ruling Liberal Democratic Party (LDP). He was runner-up to Fukuda in the race for party chief last year.

Aso did not immediately announce he would run, but told reporters he thought he was a suitable candidate.

Other potential contenders whose names have been floated in the past include Economics Minister Kaoru Yosano, known for his commitment to fixing Japan's tattered finances, and Yuriko Koike, who last year became the country's first female defence minister, although she only held the post briefly.

Fukuda, 72, had been struggling to cope with a divided parliament where opposition parties have the power to delay legislation, and his sudden departure had raised questions about his conservative party's ability to cling to power or even hold together after ruling Japan for most of the past six decades.

Ordinary Japanese were both angry and resigned.

"It cannot be helped. I thought it's about time for him to quit," said 26-year-old Seina Korenaga, waiting for her husband in downtown Tokyo.

"He did not have leadership," said her twin sister Reina Sato. "It's irresponsible."

Japan has had 10 prime ministers since 1993, when the current head of the main opposition Democratic Party, Ichiro Ozawa, left the LDP and sparked political upheaval that saw the long-ruling party briefly lose its grip on power.

DESIRE FOR EARLY ELECTIONS

Ozawa makes no secret his desire to force an early election for parliament's powerful lower house in hopes of ousting the LDP and its junior coalition partner, the New Komeito.

"The LDP will have to elect a new leader and (LDP) Secretary-General Taro Aso is the most likely candidate to succeed," said Tsuyoshi Segawa, an equity strategist at Shinko Securities.

"But the Democrats will be on the attack, accusing the LDP of irresponsibility, and a general election will be difficult to avoid," Segawa said.

"Even if Aso comes to power, it is quite likely that it will only be an interim government, so this will be difficult for stock market to digest."

The bespectacled Fukuda, a moderate conservative who favors close ties with Japan's Asian neighbors, took office last September after his predecessor, Shinzo Abe, also suddenly resigned after just a year in office.

Fukuda's resignation does not automatically mean early election. However, whoever the LDP picks as its leader, and thus the next prime minister, might chose an early poll to take advantage of any rise in public support.

A complete deadlock in parliament could also force the prime minister to call an election reluctantly. The LDP-led ruling bloc is almost certain to lose seats, if not its majority.

Analysts said the next LDP prime minister would face similar woes given the parliamentary deadlock and the party's rusting political machine and scandal-tainted image.

Talk of a broad realignment of party alliances has been simmering since the opposition took control of the upper house last year, but it remains to be seem if early moves pick up steam.

(Additional reporting by Taiga Uranaka; Editing by Rodney Joyce and Sami Aboudi)