TOKYO - Unpopular Japanese Prime Minister Naoto Kan signalled on Wednesday he is ready to resign in the coming weeks after parliament made headway on key legislation, setting the stage for Japan's sixth prime minister in five years.

Finance Minister Yoshihiko Noda, a low-key fiscal conservative, is a key contender to succeed Kan.

Japanese Prime Minister Naoto Kan (L) speaks with Finance Minister Yoshihiko Noda as they attend a committee meeting in parliament's lower house in Tokyo August 10, 2011. [Photo/Agencies]

But sceptics question whether any new leader will fare much better than his five predecessors, none of whom lasted long in office and who all struggled to implement policies to end two decades of economic stagnation and fix the deep structural problems of a fast-ageing society.

"When these two laws pass, I want to implement what I have said I plan to do," Kan told lawmakers before a lower house panel approved that bill, passage of which Kan has said was a prerequisite for his resignation.

Ruling an opposition lawmakers agreed to push the second bill that Kan wants passed through the lower house on Friday, Japanese median reported. Kan's Democratic Party was planning to vote on a new leader as early as August 28, media also said.

A new prime minister will have to find funds to rebuild Japan's northeast from the ravages of the massive March tsunami despite public debt already twice the $5 trillion economy, forge a new energy policy in the wake of the nuclear crisis at a crippled power plant and tackle tax and social security reforms.

Finance Minister Yoshihiko Noda, who like Kan sees reining in ballooning public debt as a policy priority, appears to have pole position. Surveys show, however, that he lacks appeal among ordinary voters and his calls for higher levies could make him an unpopular choice in some quarters of the ruling party.

Whether to raise taxes and how to pull the world's third-biggest economy out of deflation will likely be a focus of the party race, with some potential contenders calling for more aggressive loosening of monetary policy and wary of a plan to double the sales tax to 10 percent by mid-decade.

UNCERTAIN FUTURE

Japanese Prime Minister Naoto Kan attends a committee meeting in parliament's lower house in Tokyo August 10, 2011. [Photo/Agencies]

Some analysts hope that replacing Kan, whose policy flip-flops and abrasive personality have irked both ruling and opposition lawmakers, would allow smoother cooperation with the opposition, which controls parliament's upper house and can block legislation.

"There are a lot of things going on in both (main ruling and opposition) parties that mean it is possible that more effective government could happen," said Chuo University professor Steven Reed.

Others question whether the opposition, keen to capitalise on the Democrats' sagging support, will cooperate on much beyond an extra budget needed to fund reconstruction from the tsunami.

"The (opposition) Liberal Democratic Party is aiming at an early election, perhaps early next year," said Tomoaki Imai, a political science professor at Nihon University.

Nor is it certain that a new leader will have more success in managing a ruling party often split over policies and plagued by personal rivalries, not least between allies and enemies of scandal-tainted party heavyweight Ichiro Ozawa, now facing trial for suspected misreporting of political donations.

The Democrats swept to power in 2009 riding a wave of voter discontent and hunger for change after half a century of nearly unbroken rule by the conservative Liberal Democratic Party (LDP).

But the novice party has struggled to fulfil campaign pledges including a promise to put more cash in the hands of households rather than companies, and are now trailing the opposition in terms of voter support.

Kan has set three conditions for keeping a pledge to hand over to his party's younger generation made two months ago as the price for surviving a no-confidence vote.

One of those conditions, the enactment of an extra budget to help fund recovery from the massive March earthquake and tsunami, has already been met.

A second condition -- enactment of the bill allowing the government to borrow more to fund this year's $1 trillion budget -- now looks all but certain to be met by the end of the month.

Kan, who advocates Japan wean itself from reliance on nuclear power, also wants parliament to pass a law promoting renewable sources of energy such as solar power before quitting.

Japanese media said that bill was also likely to pass after expected revisions to meet opposition concerns.