TOKYO  — Japan’s prime minister faces a leadership challenge Tuesday from a veteran powerbroker in his own party that could give the country its third premier in a year. The race comes amid an escalating diplomatic spat with China and a surging yen that is battering the country’s vital exporters.

Prime Minister Naoto Kan, a former grass-roots activist in office just three months, faces a contest for the leadership of the ruling Democrat Party of Japan.

His challenger is Ichiro Ozawa, a gruff "shadow shogun" who wields great power behind the scenes and is widely credited with engineering the party’s landslide victory last year over the long-ruling conservatives.

Party members will vote Tuesday, and the contest remains too close to call. If Ozawa wins, he would become the country’s third prime minister since last September and sixth new leader in four years, perpetuating Japan’s high turnover in leadership.

Both men have stressed the need to revive Japan’s sluggish economy, which has fallen behind China’s and is now the world’s third-biggest. Ozawa, who has championed various reforms, favors more stimulus spending and has suggested that Japan needs to intervene in the currency market to reverse the yen’s recent spike to 15-year highs.

Kan says he wants to break free from "the old politics of money." The former finance minister has stressed the need to create more jobs while cutting wasteful programs and maintaining fiscal discipline.

Whoever wins also must deal with an increasingly assertive China, which has criticized Japan for arresting the captain of a Chinese fishing boat that collided with two Japanese patrol boats near disputed islands in the East China Sea last week.

Ozawa has been a fixture in Japanese politics for 40 years. He was previously on track to become prime minister until a scandal forced him to resign as the party’s No. 2 in June. He could be indicted as early as next month on allegations of political funding irregularities, although he claims no wrongdoing.

Ozawa is far less popular among the general public than the more affable Kan. Public opinion surveys show that Kan is preferred by a 4-to-1 margin over Ozawa.

But the leadership decision will be made by party members, not the public. The vote by 411 Democratic members of parliament will account for about two-thirds of the tally. Rank-and-file party members around the country, which account for the remaining third, cast their ballots Saturday.

Because the Democrats’ control the more powerful lower house of parliament, their leader will automatically become the prime minister.

The 68-year-old Ozawa says he is staking his political career on the vote. Once a rising star among the one-time ruling conservative Liberal Democratic Party, Ozawa bolted the LDP in 1993 to form his own reform-minded party.

Later, he joined the Democrats and became their master strategist. Ozawa has deep support in parliament, where many are beholden to him for helping start their political careers.

In his 1993 best-seller "Blueprint for a New Japan," which caught Washington’s interest, Ozawa argued that Japan needs to take a more active role in international affairs and stand up for its own interests. He’s widely seen as wanting Japan to be more assertive in its ties with the U.S. while also strengthening its relationship with neighbor and rising power China.

He’s also suggested re-opening talks with Washington over a plan to move a controversial Marine base to another part of Okinawa, citing vehement opposition of local residents.

Koichi Nakano, a political science professor at Sophia University in Tokyo, said Ozawa believes it is foolish for Japan "to be just following the American line without hedging its bets and without investing more in its relationship with Asian neighbors, beginning with China."

But if Ozawa wins, "he is going to have to become more diplomatic and reassure the Americans that trying to build a better relationship with China is not at the expense of U.S.-Japan relations," Nakano added.

A bit of a loose cannon, Ozawa recently called Americans "simple-minded," and late last year said Christianity is an "exclusive" religion that is weighing down Western society.

Kan, 63, who gained prominence in the 1990s for exposing a government cover-up of HIV-tainted blood, has a cleaner image than Ozawa and enjoys stronger support among regular party members and local lawmakers.

But Kan is also seen as a less forceful and influential politician than Ozawa, and party members blame Kan for the Democrats’ loss in July’s upper house elections because he proposed before the vote that Japan raise its sales tax.

Both men have said if they lose, they will work to support the other, but some analysts have speculated that the leadership battle could split the party. If Ozawa loses he could break away with his faction and perhaps even join forces with the LDP.