It's a political showdown pitting Japan's prime minister against his party's power broker, potentially leading to the nation's third premier in little more than a year.

In a crucial party election seen as too close to call, Naoto Kan, who only became prime minister a few months ago, is neck and neck with Ichiro Ozawa, as Japan faces a weakening economy, soaring yen and a $10 trillion mountain of debt.

Kan, considering an increase in the nation's sales tax, says his focus will be on the economy and employment.

[Naoto Kan, Japanese Prime Minister]:
"I believe our first priority is to create jobs; the second and the third are also the same."

Rival Ozawa, who stepped down last year as party chief in a funding scandal, says any tax move will have to wait while promising action on the yen and economy.

[Ichiro Ozawa, Member of Parliament]:
"The government needs to cut wasteful spending completely before discussing tax hikes."

Political Analyst Tsuneo Watanabe says the party election to decide the premiership couldn't come at a worse time.

[Tsuneo Watanabe, Political Analyst]:
"People of Japan are tired with the political confusion caused by Hatoyama three months ago and they became more tired with the same political drama by the same actors. The public's distrust is at its peak."

The election, set for September 14, will poll party members of parliament and local members, with some concerned that a defeated Ozawa may quit the DPJ, leading to further political gridlock ahead.