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By Jeff Kingston
in Japan
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Mr Koizumi has put leading conservatives in line to succeed him
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Japanese Prime Minister Junichiro Koizumi has reshuffled his cabinet, unveiling a new reform line-up that has helped clarify the likely succession to the top job.
He gave a significant boost to the chances of Shinzo Abe, 51, by naming him chief cabinet secretary - a high profile position as the top government spokesman, involving daily briefings with the media.
This is Mr Abe's first cabinet portfolio, something observers say he needed in order to vault his way into the leadership post in the ruling Liberal Democratic Party (LDP), should Mr Koizumi stand down next September as he has said he will.
A recent poll suggested that 55% of voters favoured Mr Abe to become the next prime minister, reflecting his charismatic manner and populism.
The grandson of former Prime Minister Nobuske Kishi, an indicted war criminal, Mr Abe is known for his hawkish views towards China and North Korea.
He has gained public recognition through his high-profile support for the families of citizens abducted by North Korean agents.
At his first press conference after joining the cabinet, Mr Abe indicated that he intended to continue visiting the Yasukuni shrine, a controversial memorial to the war dead in Tokyo that is viewed in China and Korea as a sign of unrepentant militarism.
But he backed away from sanctions against North Korea, calling for more dialogue.
While he is popular with the public, the business community is wary about Mr Abe's confrontational position concerning the legacies of war, and how this might deepen Japan's regional isolation.
'One race'
There are many who feel that Mr Koizumi's successor should be someone who can heal the rift between Japan and its neighbours, especially China.
Mr Abe, a conservative ideologue and a harsh critic of China, seems ill-suited to the task of improving bilateral ties.
Shinzo Abe is known as an outspoken conservative
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Another potential successor, rough-hewn 65-year-old Taro Aso, was named foreign minister.
He is also considered hawkish on security issues and does not exude the well-mannered demeanour of a diplomat.
One of the richest men in the Japanese parliament, Mr Aso recently made headlines in describing Japan as a nation of "one race", a view seen by some as being offensive to minorities.
Mr Aso has made no bones about wanting to succeed Mr Koizumi, telling the press he is ready and keen to do so.
He has also stated that he thinks overall Sino-Japanese relations are good, except for the Yasukuni issue - a rather big exception given that diplomatic relations and summits have been jeopardised as a result of visits to the shrine.
He cited robust trade ties and cultural and youth exchanges as examples of the continued resilience of the bilateral relationship.
But it is not clear how long such positive ties can be insulated from the fallout of confrontation over the past, as well as contemporary competition over disputed gas fields in the East China Sea.
Still in the running
Another succession hopeful, 60-year-old Sadakazu Tanigaki, has retained his post as finance minister.
He is suave and quietly charismatic, well-regarded internationally and in business circles.
However, he does not have Mr Aso's clout in the party nor the engaging media savvy of Mr Abe. He therefore remains a dark horse candidate.
The surprise exclusion from the cabinet is 69-year-old Yasuo Fukuda, a former chief cabinet secretary who many observers thought had a good chance of succeeding Mr Koizumi.
Foreign Minister Taro Aso admits he wants to succeed Mr Koizumi
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His criticism of the prime minister for his recent Yasukuni visit, and support for an alternative secular war memorial, did not help his chances.
In addition, Mr Koizumi stated recently that the appointment of the new youthful leader of the opposition Democratic Party of Japan, 43-year-old Seiji Maehara, would affect succession in his own Liberal Democratic Party.
Such comments hinted that the much older Mr Fukuda may no longer be in the running.
Many observers saw Mr Fukuda as the man who might be able to revive bilateral ties with China and begin healing Mr Koizumi's self-inflicted wounds.
Now it looks unlikely he will have a chance to do so.
Reformist agenda
In announcing his new cabinet, Mr Koizumi also gave some broad indications of his policy reform priorities, mentioning the need to expand and improve social services while raising the funds needed to establish a sustainable social security system.
He reiterated the need for privatisation, deregulation and structural reform. On security, he emphasized deterrence and the importance of the US alliance.
The business community has welcomed this reformist cabinet, and is reassured by the appointment of Yosano Kaoru as financial services minister and minister of fiscal and economic policy.
Mr Yosano is known as an advocate of reform and privatisation, with strong ties in financial circles.
Another staunch advocate of reform, Heizo Takenaka, was named minister of internal affairs and communications, while retaining his portfolio as minister in charge of postal privatisation.
He has stated that he will put emphasis on following through the contentious issue of post office privatisation, while also signalling the government's resolve to promote decentralisation.
He has also promised to put the government's fiscal house in order, by streamlining it and making small government a reality.
How each of the potential contenders performs over the next 10 months will be crucial. Mr Abe will have the inside track and at this point it is his race to lose.
The anticipated LDP party elections will be conducted by Tsutomu Takebe, the LDP secretary general, Mr Koizumi's handpicked reformist who oversaw the recent landslide election victory and the ousting of party dissidents.
Through him Mr Koizumi will have considerable influence over the election of a successor by party delegates.
There is usually intense factional wrangling over who will stand as a candidate, but it is conceivable that MPs Abe, Aso and Tanigaki could all run should they wish to do so.
Jeff Kingston is Director of Asian Studies at Temple University, Japan