Tokyo: New Japanese leader Naoto Kan appointed his cabinet on Tuesday as expectations jostle with doubts that he can clip the wings of a scandal-tainted party power broker and begin to tackle the nation`s huge public debt.
Kan, 63, to be sworn in as Japan`s fifth premier in three years, must convince voters to give his Democratic Party a second chance in a looming election after indecisive predecessor Yukio Hatoyama squandered sky-high support during his eight months in office.
"Kan, as Prime Minister and Democratic Party leader, appointed these ministers with the aim of creating a government that is fresh, professional, clean and can govern effectively," new top government spokesman Yoshito Sengoku said after announcing the cabinet line-up.
The Democrats will stay in power regardless of the outcome of the upper house election expected next month. But without a majority on their own, they will remain dependent on a tiny coalition partner and may need to find more allies to pass legislation smoothly, complicating the outlook for policymaking.
Kan, who forged an image as a fiscal conservative after taking over as finance minister in January, handed fellow fiscal reformer Yoshihiko Noda the finance portfolio.
He also appointed the like-minded Sengoku, formerly national strategy minister, as chief cabinet secretary -- the top government spokesman and an important policy coordinator.
Kan faces the urgent task of keeping an economic recovery on track while trying to rein in dependence on the borrowing that has inflated Japan`s debt to twice the size of its GDP.
"Kan has called for the need for fiscal reform, so that`s the direction the new government will head in. But the question is how much they can actually deliver. The consumption tax probably won`t be raised at least for three years, and we don`t even know when the next general election will be held," said Takeshi Minami, chief economist at Norinchukin Research Institute.
The next general election must be held by late 2013, and fiscal reformers are calling for a clear statement on raising Japan`s 5 percent sales tax before that vote.
"As long as the economy sustains its recovery, Kan will start working on fixing Japan`s finances," Minami said. "If problems in Europe begin to hurt and undermine the recovery, there`s a risk Japan will turn back to big spending again.
OZAWA FACTOR, KAMEI HEADACHE
In a sign the recovery remains fragile, bank lending marked its biggest annual fall in nearly five years in May, as companies remained reluctant to boost capital spending.
Relatively low government bond yields suggest the market is not expecting an immediate crisis, but credit ratings agencies have threatened downgrades if the government fails to craft credible plans to rein in debt and spur growth.
Kan reappointed 11 ministers from Hatoyama`s cabinet, including Foreign Minister Katsuya Okada, who must help manage ties with ally Washington, since an agreement to keep a U.S. airbase on Okinawa island -- forged amid controversy in Hatoyama`s final days -- faces stiff opposition from residents.
Many in the cabinet roster are critics of party power broker Ichiro Ozawa, whose campaign skills were widely seen as helping the Democrats win last year`s election but whose image as an old-style wheeler dealer has become a liability.
Ozawa has come under fire in a political funding scandal and could face charges in the case.
Kan, a former grass-roots activist with a reputation for challenging the status quo, must convince voters that Ozawa has been sidelined without triggering internal party warfare with the veteran politician and his numerous backers.
"I want us all to vow to fight and to work as one ... to win the upcoming election, which we cannot afford to lose to make the change in government real, to make this a stable government," Kan told a party gathering on Monday.
Ozawa was conspicuous by his absence. But few pundits expect him to fade entirely away, and the veteran politician has already hinted that he may seek to oust Kan if the Democrats fare badly in the upper house election.
The degree of Ozawa`s clout matters both to voters worried that he is trying to revive the vested-interest politics perfected by the LDP during its half-century rule, and to financial markets nervous about Japan`s debt.
Ozawa has opposed making a clear statement in the party`s election platform on the need to raise the sales tax. Kan will also have his hands full coping with his coalition ally Shizuka Kamei, who heads a small conservative party whose votes are needed in the upper house to pass laws smoothly.
Kamei, who was retained as banking minister, has advocated big spending to boost growth and insists that a controversial bill to roll back the privatization of the postal system be enacted in a session of parliament scheduled to end on June 16.