Prime Minister Naoto Kan planned to name a new foreign minister in his Cabinet reshuffle on Friday as he sought to put a new stamp on the administration and party leadership after surviving a challenge earlier this week.

Seiji Maehara, a security expert who had been transport minister, was likely to replace Katsuya Okada as foreign minister. At Kan’s request, Okada has accepted the No. 2 post in the ruling Democratic Party of Japan.

Kan’s Cabinet resigned en masse Friday morning to make way for the new lineup, to be announced Friday afternoon. Other key minister posts, including defence, finance and trade, are largely expected to be retained.

Kan, a fiscal conservative who took office just three months ago, won a party leadership election Tuesday and promised to use his victory over party veteran Ichiro Ozawa to push ahead with efforts to cap spending, create jobs and build unity within the often fractious ruling party.

Kan faces a host of serious problems, from reviving Japan’s sluggish economy to diplomatic spat with China over a boat collision near some disputed islands in the East China Sea claimed by both countries. Kan leaves for the U.N. General Assembly next week, but has no plans to meet with Chinese Premier Wen Jiabao, partly due to the tension.

Kan’s administration surprised markets Wednesday by ordering the Bank of Japan to intervene in the currency market to weaken the yen, whose spike to 15-year highs has squeezed foreign income at the nation’s key exporters like Nissan Motor Co. and Toshiba Corp. The dollar has since risen, although some analysts say the move’s impact will be short-lived.

The dollar, which had fallen as low as 82.87 yen Tuesday after Kan’s election, was trading at 85.69 yen Friday late morning in Tokyo.

Kan also faces an uphill battle in parliament, where the Democrats and their junior partner in a July election lost control of the less powerful upper house, which can still block legislation. To pass bills, Kan’s administration will have to seek support on a case-by-case basis with opposition parties, most of whom have suggested they won’t want to cooperate.

He is also likely to be grilled over a plan to relocate a major U.S. Marine base now housed on the southern island of Okinawa, a divisive issue that helped force out his predecessor.

Beyond reviving the economy, Kan must also address a ballooning national debt even as Japan’s population shrinks and ages, creating a smaller tax revenue base. A former finance minister, he has advocated raising Japan’s sales tax, currently 5 percent.

Kan and Okada face the tough task of unifying the ruling party after the fractious leadership election where nearly half the parliamentary party members backed Ozawa, his challenger, although regional party members overwhelming backed Kan.

Okada, who as the No. 2 controls party politics and overseeing election campaigns, has in the past been critical of Ozawa and his funding scandals, so it remains to be seen how his appointment will be received.

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