TOKYO, Sept. 2 (Reuters) - Japan's chief government spokesman, Yoshihide Suga, is set to announce on Wednesday (Sep 2) his candidacy to lead the ruling Liberal Democratic Party (LDP), and is heavily favoured to become prime minister, local media said.

Suga has not yet declared he would run to succeed Prime Minister Shinzo Abe, who said last week he would resign. But Suga has privately indicated his intention to do so, a source has told Reuters.

The party's leader will almost certainly become premier because of its majority in the lower house of parliament.

Suga, who would compete with ex-defence minister Shigeru Ishiba and ex-foreign minister Fumio Kishida for the post, is scheduled to hold a news conference at 5pm (4pm Singapore time), the LDP said. That is in addition to the twice-daily briefings he holds as the government's top spokesman.

The LDP is also due to formally announce on Wednesday the date of the leadership vote, widely expected to be Sep 14.

So far, Suga has secured the backing of five of the LDP's seven factions, public broadcaster NHK and others reported. The party decided on Tuesday to hold a slimmed-down election with just MPs and three votes from each of the 47 prefectures - an advantage for Suga.

Financial markets also favour Suga, assuming he would continue with the "Abenomics" strategy aimed at reviving the economy.

But Ishiba is by far the most popular among the public and has been on a media blitz, appearing on several television programmes over the past few days.

"During Abenomics, stocks rose, the yen was weak and wrought unprecedented profits to companies - that's something to be grateful for," Ishiba said on Fuji TV on Wednesday when asked how he would improve the lives of low-income workers and the unemployed.

"But what do we do with the dark side of that? That's the most important question in the post-Abe era," he said.