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Thursday, 26 April, 2001, 11:26 GMT 12:26 UK
Japan's new economic team
Finance Minister Masajuro Shiokawa
Shiokawa faces his first test at the G7 meeting
The cabinet appointments by new Japanese Prime Minister Junichiro Koizumi offered the financial markets a mixture of reassurance as well as surprises on Thursday.

The Prime Minister, who has a reformist reputation, surprised many by selecting the 79-year-old former transport and education minister Masajuro Shiokawa as finance minister.

Prime Minister Junichiro Koizumi
Fixing the economy is Koizumi's main task
In a move welcomed by the markets, Mr Koizumi re-appointed Financial Services Agency chief Hakuo Yanagisawa.

The stock market closed before Mr Koizumi announced his new cabinet, but ended at a three-month high on hopes the new cabinet would enact reforms.

The yen fell against the dollar in Tokyo as news of the Mr Shiokawa's appointment hit the markets.

Finance dinosaur

Mr Shiokawa is only two years younger than his predecessor, the veteran Kiichi Miyazawa, and is a virtual unknown in financial markets.

Foreign exchange traders
Currency traders have not welcomed the new economic team
"Bringing in someone young or from the private sector was probably very difficult as the Finance Ministry has to deal with all sorts of vested interests and you want someone with experience," said Takuji Okubo, senior economist at Goldman Sachs in Tokyo.

A major test of Shiokawa's prowess comes almost immediately as he flies out for a meeting of finance ministers from the Group of Seven industrialised nations in Washington this weekend.

The new finance minister has held a number of cabinet posts, including the transport and education portfolios and is currently a member of the Lower House budget committee and was manager of Koizumi's campaign to head the LDP.

Financial markets will be awaiting remarks from Mr Shiokawa to determine if Mr Koizumi is living up to his reformist rhetoric.

"I don't want to be too ageist about it. There is no reason why a 79-year-old isn't okay," said Peter Tasker, director of strategy, Arcus Investments in Tokyo.

"But it is a disappointment that he is not someone more attuned to and associated with finance and deregulation."

Shiokawa seems a uninspiring choice in comparison to his colourful colleagues in the new cabinet, including Mr Koizumi or Economics Minister Heizo Takenaka, both of whom appear frequently on television.

Financial regulator

Hakuo Yanagisawa, who has been re-appointed to his post as Financial Services Minister, has won praise for his efforts on banking sector reform.

Financial Services Minister Hakuo Yanagisawa
Yanagisawa is credited for reforming the banking sector
His reappointment was seen as crucial to enable Japan to carry out further reforms to the banking sector which is saddled with bad loans, and was a welcome relief to the markets.

But his success in dealing with the banking debts is far from complete.

"Japanese financial institutions have been dealing with the bad loan problems but the amount has not decreased significantly and may even have risen," he said after his reappointment

Economics and trade

The new economics minister is Heizo Takenaka who is well-known for frequent television appearances in which he advocates economic reforms.

Mr Takenaka has in the past called for a rise in the consumption tax to improve the nation's dire fiscal conditions and was a key advisor to former Prime Minister Keizo Obuchi.

He is also known as a strong advocate for reforming former state monopoly Nippon Telegraph and Telephone to bring in competition to Japan's information technology market.

Trade minister Takeo Hiranuma, 61, retains the post he held under outgoing Prime Minister Yoshiro Mori.

His priorities will include putting more effort into the launch of a new round of trade liberalization talks under the World Trade Organization in November in Qatar.

That conflicts with strong demands by business and industry to curb imports to boost the local economy.

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See also:

26 Apr 01 | Business
Japan's economic outlook bleak
26 Apr 01 | Asia-Pacific
New Japan cabinet causes stir
19 Mar 01 | Business
Japan cuts rates to zero
16 Mar 01 | Business
Japan admits economy has stalled
21 Mar 01 | Business
US leads fresh share falls
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