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Japan PM signals reform with cabinet,eyes election
( 2003-09-22 21:09) (Agencies)

Rejecting pleas from his party's old guard, Japanese Prime Minister Junichiro Koizumi kept a pro-reform minister in his key economics and banking posts in a cabinet shake-up on Monday, signalling he would stick to his reform agenda ahead of an expected November election.

The fate of Heizo Takenaka, an architect of strict banking reforms that are anathema to many ruling party barons, had been the main focus of the cabinet reshuffle.

The floppy-haired academic's policies have been blamed by critics for hurting the small firms that form the backbone of the economy and the LDP's traditional support, but welcomed by others for prodding banks to clean up their massive bad loans.

"I retained him to demonstrate that there has been absolutely no change in the structural reform policies of the Koizumi cabinet," the prime minister told a news conference.

The cabinet shake-up followed the popular Koizumi's landslide victory in Saturday's election for president of the ruling Liberal Democratic Party (LDP), which allowed him to stay on as premier and lead the party into a general election.

"I frankly feel that the time is nearing to seek the public's mandate," Koizumi said.

Koizumi tapped Sadakazu Tanigaki, formerly head of a state-backed corporate rescue body as well as public safety minister, to succeed outgoing octogenarian Finance Minister Masajuro Shiokawa, who stepped down due to ill health.

"This is a strong sign that Koizumi is determined to go ahead with reform," said Masaaki Kanno, chief economist at JP Morgan.

Political analysts applauded Koizumi's astute footwork in drafting a media-friendly, youthful cabinet that would appeal to the same voters who have kept his popularity ratings at well above 50 percent.

In a sign electioneering was on his mind, Koizumi had already surprised media on Sunday by appointing popular Deputy Chief Cabinet Secretary Shinzo Abe, 49, to the pivotal post of LDP secretary general, the party's de facto campaign manager.


A junior lawmaker, Abe is often touted as a future premier and known for his tough stance toward North Korea over its nuclear arms programme and the abduction of Japanese decades ago.

"He can definitely sell this (personnel line-up) as not having given in to anyone," said Chuo University political science professor Steven Reed, referring to speculation that Koizumi had done deals with LDP barons to win support.

"He really knows what he's doing."

Several new ministers have their work cut out for them.

Tanigaki, who has also served as vice finance minister, will have to cope with a surge in the yen, which hit its highest level against the dollar in almost three years on Monday, threatening Japan's emerging, export-led economic recovery.

At a news conference, Tanigaki tiptoed around questions on currencies. "In the big picture, the basic policy is unchanged," he said, referring to the official line that sudden moves in currencies were undesirable.

The yen soared as high as 111.40 yen to the dollar after a weekend Group of Seven meeting on speculation pressure from trade partners would force Tokyo to stop trying to hold down its value.

Worries over the effect of the yen's surge on exporters' profits hit Tokyo stock market's main barometer, the Nikkei average, which closed down 4.24 percent at 10.475.10.

Koizumi, who roundly defeated three rivals in Saturday's party poll, has been criticised for being both too slow and too hasty on reform. Some analysts said little would change.

"We'll see gradual progress on reforms, so in that sense it's good," Peter Morgan, chief economist at HSBC Securities, said of the cabinet. "Whether we will see anything terribly radical remains to be seen, and I remain somewhat doubtful," he added.


Many LDP lawmakers and members from traditional support groups such as farmers, construction companies and small businesses dislike Koizumi's reform policies.

But they opted for the popular premier as the best bet to lead the party into an election against a pro-reform opposition.

"We, the Democratic Party, want to stress anew to the people that unless there is a change in government, it will be impossible to break out of Japan's current situation and carry out reform," said Naoto Kan, head of the main opposition party.

Koizumi retained Yoriko Kawaguchi as foreign minister in a surprise move, despite pressure from LDP heavyweights to remove the former trade bureaucrat because she lacks political clout.

In another nod to the growing importance of media in Japanese politics, Koizumi chose Yuriko Koike, a former television anchor-woman turned lawmaker, as environment minster.

Former LDP policy chief Taro Aso was tapped as post and telecoms minister, which means he will oversee Koizumi's controversial plan to privatise the postal system.

Shoichi Nakagawa, 50, a former agriculture minister, was appointed minister of economics, trade and industry.

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