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Japan PM Kan to launch new govt as election looms

NEW Japanese leader Naoto Kan will launch his cabinet today as expectations jostle with doubts that he can clip the wings of a scandal-tainted party powerbroker 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 predecessor Yukio Hatoyama squandered sky-high support during his eight months in office.

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, is expected to hand fellow fiscal reformer Yoshihiko Noda the finance portfolio.

He will also appoint like-minded former National Strategy Minister Yoshito Sengoku 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.

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.

Kan will likely also reappoint many ministers from Hatoyama's cabinet, including Foreign Minister Katsuya Okada, who must help manage ties with ally Washington, since an agreement to keep a US airbase on Okinawa island -- forged amid controversy in Hatoyama's final days -- faces stiff opposition from residents.

Many in the expected cabinet roster are critics of party powerbroker 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 FACTOR, KAMEI HEADACHE

Ozawa has come under fire in a political funding scandal and could face charges in the case.

Kan, a former grassroots activist with a reputation for challenging the status quo, must tread a fine line between convincing 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 Monday after announcing his new party executives.

Ozawa was conspicuous by his absence.

But few pundits expect Ozawa 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 5 percent sales tax to help repair Japan's tattered finances.

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, expected to be kept as banking minister, has advocated big spending to boost growth and insists that a controversial bill to roll back privatisation of the postal system be enacted in a session of parliament scheduled to end on June 16.



 

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