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Koizumi reshuffles staff, focus on banking, yen
( 2003-09-21 16:17) (Agencies)

Fresh from victory in a vote for ruling party chief, Japanese Prime Minister Junichiro Koizumi named top party aides on Sunday, offering clues as to the cabinet he will pick to face a general election expected in November.

The scale of his landslide victory in Saturday's Liberal Democratic Party (LDP) race put Koizumi in a position to reject demands by the party's old guard to sack reformist Financial Services and Economics Minister Heizo Takenaka and controversial LDP Secretary General Taku Yamasaki.

The finance minister's post has been in the spotlight in the wake of the yen's rise to two-and-a-half year highs against the dollar last week and criticism from Group of Seven (G7) economic powers about Japan's market intervention to beat it down.

But Koizumi was seen to have compromised with his opponents within the party by opting for a sideways move for Yamasaki, who is a key political ally but lacks public support.

Yamasaki told reporters he would take over as deputy party leader, a ceremonial position that has been vacant for some time, and deputy Chief Cabinet Secretary Shinzo Abe would replace him as party Secretary General.

This is a fast-track promotion for the 49-year-old Abe, popular with the public for his keen interest in the plight of Japanese abducted by North Korea. He is known for his hard line on the isolated communist country.

"With a general election in November becoming a certainty, Koizumi appears to be preparing a line-up that is easy on the voters' eyes," said Shigenori Okazaki, political analyst at UBS.

Mitsuo Horiuchi, the second of the three top LDP officials, retained his post, while former defence minister Fukushiro Nukaga took over as party policy chief, freeing the third top official, conservative Taro Aso, to take up a cabinet position.

The new cabinet is expected to be announced on Monday and Koizumi said on Saturday he would keep his cards close to his chest until then.

Koizumi won 399 of 657 votes in the LDP race, allowing him to keep the premiership and lead his three-party coalition into a general election that he has hinted will be held in November, although the coalition must extend an anti-terrorism bill before parliament can be dissolved.

Closest challenger Shizuka Kamei, an advocate of big government spending to bolster the economy, won just 139.


Only a few weeks ago, many pundits said deep dislike for Koizumi's painful reforms might prompt rank-and-file LDP members and lawmakers to give him the thumbs down.

But with such views disproved, odds lengthened that Koizumi would succumb to pressure to dismiss Takenaka, whose policy of forcing banks to make a more realistic assessment of their balance sheets has been blamed for hurting small businesses.

Hidenao Nakagawa, an LDP lawmaker regarded as one of Koizumi's closest confidants, said he expected Takenaka to stay, though it was unclear if the minister would keep both his banking supervisory and economic planning portfolios.

Speculation has been rife Takenaka could lose one, probably the financial services role.

"I think hopes on Mr Takenaka's policy were behind the economic recovery expectations that are evident in the recent stock market rally," Nakagawa told Fuji TV.

"I think the prime minister will definitely not replace him. Whatever his position may be, we must have Mr Takenaka's cooperation."

Eisuke Sakakibara, a former vice finance minister for international affairs, said the most important decision now was to pick a new finance minister, as the yen's strength threatened to choke Japan's nascent, export-reliant economic recovery.

The incumbent finance minister, 81-year-old Masajuro Shiokawa, skipped Saturday's G7 meeting in Dubai for health reasons and has said it would be difficult for him to continue.

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