Jun Azumi, a former parliamentary affairs chief for the ruling Democratic Party, will become Japan's new finance minister, local media said, after new Prime Minister Yoshihiko Noda's first choice for the job reportedly turned it down.
Azumi will take charge of Japan's currency and fiscal policies at a time when the world's third-biggest economy grapples with the yen's sharp appreciation and a public debt twice the size of its $5 trillion economy.
-- The lineup of the new cabinet is expected to be announced on Friday by Yoshihiko Noda, 54, who was voted in by parliament as prime minister this week, becoming the nation's sixth leader in five years.
-- Noda, himself finance minister from June 2010 in the previous administration, backed a government proposal to double the 5 percent sales tax by the middle of the decade to fund bulging social security costs and curb massive public debt.
-- Katsuya Okada, a fiscal hawk who held the party's No.2 post, turned down Noda's request to take over the crucial financial portfolio, public broadcaster NHK reported earlier.
-- In other key posts, Motohisa Furukawa, a former finance ministry bureaucrat, will become economics minister in the new cabinet, Jiji news agency said.
TADASHI MATSUKAWA, HEAD OF FIXED INCOME INVESTMENT MANAGEMENT, PINEBRIDGE INVESTMENTS, TOKYO
Azumi doesn't have strong views on economic policies. As he is from the earthquake-hit Tohoku region, perhaps that would be positive for rebuilding.
He was in charge of talking with opposition parties and I think he was tapped because of his negotiation skills. He will be listening to other people's opinions rather than pushing his ideas.
It appears that Noda is tapping people who are good at negotiating, perhaps considering the relationship with the opposition.
But in any case, Azumi's appointment has no positive or negative impact on the bond market.
KOJI FUKAYA, DIRECTOR OF GLOBAL FOREIGN EXCHANGE RESEARCH AT CREDIT SUISSE SECURITIES, TOKYO
I don't know this person and I'm just looking him up at the moment. I can't find any statements on his fiscal stance so far.
One hand, an appointment of a relatively unknown person raises more questions than answers and hightens a sense of uncertainty, but on the other hand Noda is in charge so I can't imagine major changes to fiscal policy.
I don't think there will be any major changes to Japan's yen intervention policy, but there's a bit of uncertainty because we don't know his personal stance, so it's really hard to say anything.
Okada was known for his ties with the U.S., we thought he would be effective in intervening in the markets, but with Azumi, we just simply don't know.
KOICHI HAJI, CHIEF ECONOMIST, NLI RESEARCH INSTITUTE, TOKYO
If he were a veteran lawmaker, the new finance minister might have clashed with Noda on some issues. But that appears not to be the case and the choice is likely a sign Noda will pursue his own policies on economic and fiscal issues.
Noda seems to be focusing on party unity but maybe too much. His personality or views aren't really clear from the cabinet choices reported so far. Economic and fiscal policies won't change much under Noda and the new finance minister. Given strong opposition within the party, Noda won't be able to raise taxes immediately so the key would be to make sure the government finds a source of revenue to redeem bonds to be issued for post-quake reconstruction.
Noda isn't as explicit in his demands on the Bank of Japan as others who were candidates for party head. But with fiscal policy options limited, he won't have much choice but to rely on monetary policy in supporting the economy. That means pressure on the BOJ for further monetary easing will increase.
AYAKO SERA, MARKET ECONOMIST, SUMITOMO TRUST AND BANKING, TOKYO
He (Azumi) has not made many comments about intervention or fiscal policies so his basic policy stance is not clear.
The key would be how well he could manage and work with the bureaucrats because of the friction the party has created with bureaucrats. Azumi has appeared on media and leaves an impression as a very intelligent person, so there is a risk that he might pursue his own path without sufficiently consulting others.
JESPER KOLL, DIRECTOR OF EQUITIES RESEARCH AT JPMORGAN, TOKYO
Noda's strong hold is the finance ministry. Assuming he is going to leverage that, no politician wants the job because fiscal, budget and tax policy are going to be led by the prime minister. Whomever Noda nominates, the finance minister will likely be a 'yes-man' for Mr Noda.
-- Noda has said Japan will need to raise taxes temporarily to help pay for rebuilding from the devastating March 11 tsunami. But he has grown more cautious about the timing of any rises, saying economic growth and fiscal reform are both vital.
-- Noda has promised firm steps including intervention against excessive and rapid currency moves and wants to work closely with the Bank of Japan.
-- The new administration will have to cope with a resurgent yen that threatens exports, forge a new energy policy while ending the worst nuclear crisis since Chernobyl.
-- The Democrats swept to power two years ago promising to change how Japan is ruled. But the party quickly lost momentum, dogged by internal divisions and a hung parliament as its novice team confronted the global financial crisis. The March disaster left 20,000 dead or missing and has pushed the economy back into recession.
-- Moody's Investors Service cut Japan's sovereign credit rating on August 24 citing a buildup of public debt and a lack of leadership and a long-term strategy to cope with its fiscal challenges.
(Reporting by Tokyo newsroom)