Noda is considered a safe pair of hands to lead the world's third-biggest economy but doubts run deep as to whether he will have sufficient support and stay in office long enough to tackle a long list of economic woes and cope with a nuclear crisis.

The 54-year-old Noda, who defeated Trade Minister Banri Kaieda in a run-off vote in the ruling party, must deal with a resurgent yen that threatens exports, forge a new energy policy while ending the worst nuclear crisis since Chernobyl, and find funds to rebuild from the March 11 tsunami at a time when huge public debt has already triggered a credit downgrade.

"Noda has inherited all the same problems -- a divided parliament, a divided party, a strong yen, a Tohoku (northeastern Japan) desperate for progress on reconstruction and an early end to the nuclear crisis," said Jeffrey Kingston, director of Asian Studies at Temple University's Japan campus.

"I think the honeymoon will be very short-lived."

No Japanese prime minister has lasted much more than a year since 2006 and most market players polled by Reuters this month thought the next government head would be no exception.

Noda, who will be confirmed by parliament on Tuesday, will be the third premier since his ruling Democratic Party of Japan swept to power in 2009, promising change.

Instead of a deep debate over how to jolt Japan out of decades of stagnation, the party vote had turned into a battle between allies and critics of Ichiro Ozawa, a 69-year-old political mastermind who heads the party's biggest group even as he faces trial on charges of misreporting political donations.

Kaieda, backed by Ozawa, got 177 votes in the run-off while Noda, supported by Ozawa critics, won the backing of 215 deputies.

Analysts said despite the defeat of his candidate, Ozawa remained a powerful -- and divisive -- force.

"He is still important, though not as important as he was," Temple University's Kingston said.

Noda's rise to the top job could cause some friction with China after he recently repeated that Japanese wartime leaders convicted by an Allied tribunal after Japan's defeat in World War Two were not "war criminals" under domestic law.

He has also said China's rapid military buildup and expanding naval activities pose a serious regional risk, and stressed the importance of the US-Japan security alliance.

"Noda's attitude toward China has in the past been somewhat hardline, and he has close relations with the United States, which would not bode well for China-Japan ties," said Sun Cheng, an expert on Japan at the China University of Political Science and Law.

"However, he has been compromising on his views, and I think he will want to maintain stability in China-Japan relations," Sun added.

Bond markets welcomed the choice of Noda, who among the candidates was the only one consistently calling for Japan to face painful reforms to curb its massive debt.

"Let's do the utmost to tackle what we have promised and if there's not enough money, we might ask the people to share the burden," Noda said before the vote.

The finance minister, who knocked out telegenic former foreign minister Seiji Maehara -- the favorite of ordinary voters -- in the first round, injected a rare moment of levity into the tense event.

The jowly, stocky lawmaker compared himself to a "dojo" loach fish -- an eel-like inhabitant of the deep.

"I do look like this and if I become prime minister, the support rate would not rise, so I would not call a snap election. A loach has its own abilities even though it cannot do as a goldfish does."

Noda has said Japan should not build new atomic reactors, effectively phasing out nuclear power over 40 years. But he wants to restart off-line reactors after safety checks to avoid a power crunch. Japan relied on atomic power for about 30 percent of its electricity before the Fukushima nuclear crisis.

One of Noda's first challenges will be seeking opposition help in parliament, where it controls the upper house and can block legislation. He has floated the idea of a "grand coalition" with opposition rivals -- although the two biggest opposition groups have been cool.