Japan's Abe taps fiscal conservatives to keep world's No. 2 economy chugging

Akira Amari, appointed economy and trade minister, had previously served as labour minister in the late 1990s. At that time, he urged Japan to battle rising unemployment by deregulating the labour market, bolstering training and subsidizing small businesses.

Rounding out the brain trust will be Hiroko Ota, who was formerly the senior cabinet office official in charge of compiling the annual economic report. She is now a professor of economics at the National Graduate Institute for Policy studies.

The appointments came Tuesday afternoon after parliament elected Abe to succeed Junichiro Koizumi as prime minister.

For the five last years, Japan has mounted an economic comeback from more than a decade of doldrums under reforms ushered in by Koizumi.

But the new premier faces a host of challenges: taxation problems, a growing gap between rich and poor, massive government debt, a shrinking population, frayed relations with Asian trading partners and a lingering oversensitivity to U.S. downturns.

With Japan finally emerging as an engine for global growth, any misfires on these matters could have far-reaching fallout.

Abe, who has no experience in economic matters, has already fallen prey to critics who say his financial policies are too vague and not detailed enough. Abe focuses too much on creating economic growth without enough thought into how to do it, opponents say.

He has also stepped around the need for tax hikes to pay for mounting medical and retirement costs of an aging population.

Under Koizumi's watch, unemployment has dropped, the stock market has rocketed, the government has been streamlined and bad debt has been mopped up at the nation's banks. The public corporations running the country's highways have been privatized and he passed a plan to do the same to the post office.

Japan's economy has now expanded for six straight quarters.

Some economists applauded Abe's choices for cabinet positions as being on the right track because of the focus on pursuing economic growth. But it also appeared that Abe emphasized personality as much as talent.

"There seems to be a lot of weight put on whether they will further the party's goal and not just on their individual ability to pursue policy," said Makoto Yamashita, an economist with Lehman Brothers in Tokyo.

"I can't say it's an excellent team, but the basic stance is good."

Omi has so far served as economic planning minister and technology minister. He is a veteran ruling party politician who has been elected Lower House member eight times and belongs to a party faction that Abe just left to become prime minister.

Omi, who replaces Sadakazu Tanigaki, rose to prominence as the architect of an earlier economic revival plan in the late 1990s that focused on restraining government spending, deregulating the economy and overhauling taxes to stimulate business.

His agency also called for quicker action to write off banks' non-performing loans and increased efforts to shore up Japan's welfare programs and underfunded social security system.

Amari is a veteran of the same generation of reformists, pushing deregulation of the labor market to spur growth.

Economists now credit many of those actions as setting the stage for the improvement seen under Koizumi, even though they were often criticized at the time as ineffectual.

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