Japanese prime minister Naoto Kan and powerbroker Ichiro Ozawa were making their final efforts today to woo undecided lawmakers one day before a cliff-hanger ruling party leadership vote that could reset 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.
The contest coincides with a flare-up in a territorial row with China after Japan arrested a Chinese captain whose fishing boat collided with two Japanese coastguard ships in disputed seas, highlighting strains between the two economic giants.
Mr Kan (63) has vowed to cap spending and borrowing and discuss 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.
Mr Ozawa wants to keep spending pledges that helped the party sweep to power for the first time in last year's elections, and has said he would consider more borrowing to fund stimulus if the economy falters.
He has also vowed to act to curb the yen, whose rise to 15-year highs is threatening Japan's economic recovery, including solo intervention in currency markets. Mr Kan's team has repeatedly expressed its concern about the yen's climb, but so far has refrained from stepping into the market.
But it remains unclear if 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 Mr Kan has secured more votes than Mr Ozawa from local politicians as well as party members and supporters who had to submit their votes by Saturday, while running neck-and-neck among members of parliament, whose votes carry more weight.
Mr Ozawa is unpopular with most voters, who are put off by his image as an old-school wheeler-dealer. Admirers say his leadership and skills honed in a four-decade career are just what Japan needs, while critics question whether his policies would help the nation escape decades of stagnation.
"Mr 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."
Hoping to sway some 30 members of parliament who are still undecided, Mr Kan made the rounds of offices near parliament and prepared a speech to be given before the party vote, media said.
Mr Ozawa, reflecting an approach that has given him clout in the past, courted eight interest groups including a truckers association and doctors organisation, Nikkei business daily 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.
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.
Reuters