Ruling party picks outspoken Aso to be Japan PM

(For more on Japan's leadership race click [ID:nT114525])

* Japan ruling party picks former foreign minister Aso as PM

* Aso vows resolute fight in looming general election

* Parliament votes Wednesday to confirm ruling party decision (Adds fresh analyst comments and reaction from voters)

By Chisa Fujioka

TOKYO, Sept 22 (Reuters) - Outspoken nationalist Taro Aso, an advocate of spending and tax cuts to boost the economy, won the race on Monday to become Japan's next prime minister and swiftly set his sights on an election expected within months.

Aso, a former foreign minister, clinched the ruling Liberal Democratic Party leadership vote by a landslide to take over from Yasuo Fukuda, who quit this month just as the economy flirts with recession and faces further damage from turmoil on Wall Street.

"As I travelled around the regions, I became even more convinced that the economy was in a recession," Aso, 68, told a news conference after winning the leadership, adding his priority was to revitalise the economy before tackling a huge public debt.

However, Aso may have little time to revive the world's second-biggest economy if, as media and pundits predict, he calls an early poll for parliament's powerful lower house.

"Standing here, I feel that this is Taro Aso's destiny," Aso, the grandson of a premier, told LDP members after winning 351 of 525 valid votes cast by party lawmakers and chapters.

"But the LDP, as the government party, must resolutely fight the (opposition) Democratic Party in the next election, and only when we have won that election will I have fulfilled my destiny.

Aso, set to be voted prime minister on Wednesday by virtue of the ruling bloc's majority in parliament's powerful lower house, will be Japan's third prime minister in a year. Both his predecessors quit in the face of a deadlocked parliament, where the opposition controls the upper house and can stall bills.

"It's going to be a weak government and there is going to be an election and there will probably be a weak government as a result of the election," said Columbia University professor Gerry Curtis. "Japan will not be in a position to play a more dynamic role in world affairs. It will be more and more inward-looking."

The ruling bloc is expected to lose in the next election the two-thirds lower house majority that allows it to override upper house vetoes, and analysts say a clear victory for either side camp may prove elusive, leaving more policy paralysis.

TAPPING RIVALS, EYEING POLLS

One voter predicted that, with many longing for change, the long-ruling LDP could lose its grip on power altogether.

"The Liberal Democratic Party is already finished regardless of who got elected," said 52-year-old advertising producer Youji Nomura. "The LDP is completely corrupt, and I don't think the new prime minister would last even a year, no matter who it is."

Aso, who wants tax cuts for businesses and stock investors, has said Japan's goal of balancing its budget by 2012 could be put off, a stance that has alarmed fiscal reformers in his party but charmed local party machines looking toward the election.

Aso won five times the votes of his nearest rival to clinch the top post on his fourth attempt to lead the party.

Economics Minister Kaoru Yosano, a fiscal conservative, was a distant second with 66 votes and former defence minister Yuriko Koike came in third with 46 votes for her bid to become Japan's first female prime minister.

Japanese media said Aso was considering keeping Yosano in a new cabinet to be formed on Wednesday as well as tapping another rival, former defence minister Shigeru Ishiba, in an effort to unify the party, which is suffering from dismal voter ratings.

Though inclined to view China's rising clout with concern, Aso is likely to stick to Fukuda's diplomatic stance that stresses Japan's tight security alliance with the United States and stable ties with China, which have warmed after years of strains due bitter wartime memories and regional rivalry.

He is likely to stay away from Tokyo's Yasukuni Shrine, seen by Beijing as a symbol of Japan's past military aggression, although analysts say his tendency toward verbal gaffes that offend at home and abroad could prove a problem.

Aso, a dapper dresser and fan of manga comic books popular with young people, regularly tops voter surveys for next prime minister, making him the LDP's natural choice to lead it in a general election that must be held by next September.

Japanese media say an election could be called for as early as Oct. 26 to make the most of any bounce in public support, although Aso has said his priority was to pass an extra budget to support the economy.

The new leader would be seeking a mandate to break a deadlock in parliament, but with both sides facing a tough battle, speculation is rife over a possible rejigging of party allegiances, although an attempt by Fukuda and main opposition Democratic Party leader Ichiro Ozawa to form a "grand coalition" flopped last year. (Additional reporting by Yoko Kubota, Isabel Reynolds, Naoto Okumura and Linda Sieg; Editing by Rodney Joyce)