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Koizumi ignores party pressure

"Many opinions were expressed, but the prime minister decided to retain me. I think this displays his strong intention to push ahead with structural and fiscal reforms."

Heizo Takenaka, minister for economic policy

Emboldened by his re-election as head of Japan's ruling party, Prime Minister Junichiro Koizumi named a new Cabinet yesterday, retaining a controversial fiscal advisor and snubbing a powerful rival faction to show his determination to stand by his economic reforms.

Koizumi was re-elected Saturday to a three-year term as Liberal Democratic Party chief.

In a surprising move, he retained Heizo Takenaka, a former university professor, as both minister for economic policy and minister of financial services.

Takenaka has a been a lightning rod of criticism over Koizumi's efforts to revive Japan's sickly economy and Japanese media had widely reported he would be either dropped from the roster or stripped of one of his posts.

Takenaka had been slammed by many in the party for his tough stance on cleaning up the huge pile of bad debt amassed by Japan's banks. That stance, however, has been welcomed by many economists and investors.

"Many opinions were expressed, but the prime minister decided to retain me," Takenaka said. "I think this displays his strong intention to push ahead with structural and fiscal reforms."

Koizumi also replaced finance minister Masajuro Shiokawa, who is 81 and in poor health. Appointed to the post was Sadakazu Tanigaki, who previously held the public security portfolio and also served in the relatively new position of minister for industrial revitalization.

"There will be no change in our fundamental policy," he said following his appointment.

Though Japan's economy is growing faster than previously expected, Koizumi has been under intense pressure to increase public spending to bring down record-high unemployment and boost business sentiment.

Koizumi won re-election by a wide margin, but was under intense pressure to replace members of his current Cabinet who were selected not from within the ruling party but from the private sector.

He replaced one of those advisors, education minister Atsuko Toyama, with veteran lawmaker Takeo Kawamura, entering the Cabinet for the first time. But, in another surprise move, chose to retain another, Yoriko Kawaguchi, as foreign minister.

Naming a Cabinet in Japan has traditionally involved a careful balancing act, giving each of the party's main factions positions that reflect their relative strength.

But Koizumi gave the party's largest faction, which has opposed him throughout his term, only one top post in the 18-member Cabinet -- the defense agency portfolio, retaining veteran lawmaker Shigeru Ishiba.

Though risking a rebellion from the rival faction, Koizumi has so far effectively kept the faction at bay by using his personal charisma to appeal directly to the voters and the party's rank and file.

He remains one of the most popular leaders Japan has seen in decades, though his support has fallen from over 80 percent to around 50 percent in recent weeks.

Recharged by his re-election landslide, Koizumi has indicated he would like to call parliamentary elections as early as November, setting up a long-awaited showdown with Japan's political opposition that could further bolster the ruling party's power in the legislature.

The opposition has been scrambling to regroup ahead of the polls, and the two largest opposition parties are expected to officially join forces later this week.

With that battle in mind, Koizumi has moved quickly to consolidate his position by packing key positions with allies.

Along with the Cabinet appointments, Koizumi has already installed two allies in top party posts. His choice of Shinzo Abe, a popular 49-year-old party cadre who has never held a Cabinet level position, for the No. 2 post has been hailed as both bold and savvy.

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Takenaka vows to clear bad loans

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