* Ruling party picks new leader in a vote on Monday
* Winner becomes Japan's sixth premier in five years
* Power broker Ozawa wields influence
* Next PM faces piles of challenges after quake
(Adds quotes, details)
By Tetsushi Kajimoto and Linda Sieg
TOKYO, Aug 27 Japan's ruling Democratic Party
formally kicked off a leadership race to pick the next prime
minister on Saturday, with no clear winner among five candidates
in sight, as the country confronts a series of economic and
The race to select Japan's sixth leader in five years is
shaping up as a battle between allies and critics of party
powerbroker Ichiro Ozawa, a 69-year-old political mastermind who
still wields clout despite facing trial on charges of
misreporting political donations.
The successor to Prime Minister Naoto Kan, who resigned on
Friday as Democratic Party of Japan (DPJ) leader after months of
criticism of his response to the March tsunami and the nuclear
crisis it triggered, faces a mountain of challenges.
The next leader must grapple with a resurgent yen that
threatens exports, rebuild from the disaster, forge a new energy
policy while ending the world's worst nuclear crisis since
Chernobyl, and find funds to pay for the bulging social welfare
costs of an ageing society while reining in public debt already
twice the size of the $5 trillion economy.
The impression that power struggles, not policies, are
dominating the race risks further denting support for the
Democrats, who swept to power in 2009 promising change. Their
ratings have sagged due to policy flipflops, indecision and
charges of a bungled response to the disasters.
Graphic on Reuters PM survey: link.reuters.com/cyg33s
Graphic on Japan voter support: r.reuters.com/myv63g
Graphic on Japan recent PM's: link.reuters.com/cer43s
FACTBOX on key policies of candidates
BREAKINGVIEWS on PM race:
For more stories on Japan politics:
Five lawmakers, including fiscal conservative Finance
Minister Yoshihiko Noda, Trade Minister Banri Kaieda and former
foreign minister Seiji Maehara, registered on Saturday to run in
the Aug. 29 party vote. The winner will become prime minister by
virtue of the DPJ's majority in parliament's lower house.
In a debate on Saturday, all five ruled out immediate tax
increases to fund reconstruction for fear of hurting a fragile
recovery, but Noda left the door open to future rises.
All agreed that the decades-old Japan-U.S. security alliance
is the pillar of Japan's diplomacy while urging better ties with
Asia, but Noda warned against a rising China.
"Next year is a period of changes with a transition of
leadership. They could meddle to fan nationalism," Noda told a
news conference in apparent reference to Beijing.
Maehara, a security hawk, says beating deflation is a top
priority, is the most popular with ordinary voters. An Asahi
newspaper poll published on Saturday showed that 40 percent of
voters surveyed preferred the 49-year-old lawmaker.
Only DPJ lawmakers can vote in the party poll, so Maehara
faces a tough battle against Kaieda, 62, who on Friday secured
the backing of Ozawa -- who heads the DPJ's biggest group -- and
his ally, former prime minister Yukio Hatoyama.
To break deadlock in a divided parliament where opposition
controls the upper house and can block bills, Maehara called for
forming a "grand coalition" with opposition parties, drawing a
stark contrast with Kaieda, who said he opposed the idea.
The outlook for a victory by Maehara, who stepped down as
foreign minister in March after admitting he had unknowingly
accepted donations from a Korean resident of Japan, is also
clouded by Noda's candidacy, since their support bases overlap.
Accepting funds from foreign nationals is illegal if done
so knowingly. Maehara said on Saturday that he had received a
total of 590,000 yen ($7,676) in contributions from four foreign
individuals and a firm headed by a foreigner between 2005 and
2010, but was unaware of the donations or that the firm in
question was headed by a foreigner, Japanese media reported.
If no candidate wins a majority in an initial vote, the two
top candidates will square off in a second round and media said
both Maehara and Kaieda were already jockeying to woo backing
from other candidates if that happens.
($1 = 76.855 Japanese Yen)
(Additional reporting by Osamu Tsukimori; Editing by Ed Lane)