Takeo Fukuda, widely tipped to be a candidate to succeed Koizumi when he steps down in September, is known for a relatively conciliatory attitude to China and South Korea.

Both countries suffered brutal Japanese occupation before and during World War Two, and have been angered by the prime minister's visits to the Yasukuni shrine.

"It is a truly unhappy situation," Fukuda told an audience in the industrial city of Nagoya on Saturday, referring to the chilling of relations with Japan's Asian neighbors, the Mainichi Shimbun reported.

"Saying 'What's wrong with going to Yasukuni?' makes them emotional. Having the respective leaders and peoples get emotional is the worst situation," it quoted him as adding.

Critics see Yasukuni, where convicted war criminals are honored alongside the nation's millions of war dead, as a symbol of Japan's militarist past. Koizumi insists he visits the shrine to pray for peace and to honor the dead, not to glorify war.

Current top government spokesman Shinzo Abe, known for his hawkish views on China and North Korea, consistently tops public opinion polls on who should succeed Koizumi. But in recent weeks some polls have shown Fukuda, one of his predecessors as chief cabinet secretary, making gains, with voters citing concerns about Japanese diplomacy.