Thursday, July 30, 1998 Published at 05:31 GMT 06:31 UK
Obuchi voted Japan's PM
Kiichi Miyazawa (left) was appointed as finance minister by Keizo Obuchi (right)
Former Foreign Minister Mr Obuchi received 268 out of the 497 votes in the lower house to become Japan's 84th prime minister. He was defeated in a simultaneous vote in the upper house, but the lower house vote was enough to secure him the premiership.
He replaces Ryutaro Hashimoto who resigned after a poor electoral showing by the ruling Liberal Democratic Party at the beginning of July.
It will include the veteran politician and one-time prime minister, Kiichi Miyazawa, 78, who has agreed to become finance minister.
Mr Obuchi has already said that tackling Japan's economic crisis is his top priority.
According to our correspondent, the new government is likely to take action against the bad loans that are crippling the Japanese banking system, and to introduce tax cuts to stimulate consumer spending.
Japan's economy is suffering its worst recession since the Second World War and the country's new leader will be expected to find a cure.
Mr Hashimoto's cabinet has already resigned, leaving their seats vacant for Mr Obuchi's apointees.
Nicknamed "Mr Ordinary", Mr Obuchi's election to the LDP leadership was greeted with scepticism by observers who felt he lacked the vision to lead Japan through a critical period.
His strengths are seen as those of a skilled politician who will be able rally parliamentary support for reformist measures. Some commentators have said that this leaves Mr Obuchi better equipped than his predecessor to put Japan back on the right course.