June 7 (Reuters) - Japan's Naoto Kan takes over as prime minister this week, faced with the challenge of fixing policy disarray and cutting a huge public debt that is constraining options for keeping economic recovery on track.

Kan, previously finance minister, takes over from Yukio Hatoyama, who quit last week after just eight months in office.

With euro zone tremors roiling markets worldwide, the focus is on Japan's debt burden and the government risks credit rating downgrades if it fails to get a grip on public finances.

Japan's 5-year sovereign credit default swap JPGV5YUSAC=MP spreads have risen 23.5 basis points over the past month to 94.2 basis points, the highest since March 2009. U.S. and UK spreads have widened only 5.3 basis points and 4.2 basis points.

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