TOKYO (Reuters) ? New Japanese Prime Minister Yoshihiko Noda has picked a like-minded fiscal conservative, Katsuya Okada, as finance minister in his cabinet due to be unveiled on Friday, local media reported.
Jiji news agency said Okada, 58, formerly the ruling party secretary general, had accepted the finance portfolio, which will be key as Japan grapples with the yen's sharp rise and a public debt twice the size of the $5 trillion economy.
"Okada was probably the best choice available. He fits the bill for a finance minister -- he is well known, knows his financial policies and is trusted by Noda," said Katsutoshi Inadome, fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities. Okada has also served as foreign minister.
Noda, 54, who was finance minister under the previous prime minister, Naoto Kan, was voted in by parliament this week as the nation's sixth leader in five years.
Noda, who must unite warring factions in his fractious Democratic Party of Japan (DPJ) while reaching out to the opposition in a divided parliament, also tapped close ally Osamu Fujimura for the key post of chief cabinet secretary, Japanese media reported.
Fujimura, 61, will become de facto No.2 in the cabinet, combining the role of top government spokesman with responsibility for liaising with ruling and opposition parties as well as different ministries.
MOUNTAIN OF CHALLENGES
Noda's new government faces a mountain of challenges: forging a new energy policy while ending a radiation crisis at the crippled Fukushima nuclear plant, rebuilding Japan's tsunami-devastated northeast, and finding funds to pay for that and the vast costs of social welfare in an aging society.
"Okada is likely to maintain Noda's fiscal reform drive, including the plan to raise the sales tax," said Junko Nishioka, chief economist at RBS Securities in Tokyo.
"But the question of who will be picked for other ministerial posts and the question of whether Noda's government will be able to build good relations with the opposition are more important for fiscal consolidation than who fills the finance minister post."
Noda will keep Goshi Hosono, 40, as nuclear crisis minister and give him an environment post as well, according to public broadcaster NHK.
The government has decided to set up a new nuclear safety agency under the auspices of the environment ministry, instead of the trade ministry whose regulators were seen as too cozy with the industry.
Hosono has been the government's point man on the nuclear crisis.
Reconstruction Minister Tatsuo Hirano will stay in that post, Kyodo News Agency said.
In an effort to win opposition support, Noda on Thursday suggested to the main opposition Liberal Democratic Party (LDP) and its former partner, the New Komeito party, the creation of joint task forces with the Democrats to discuss reconstruction, tax reform and economic stimulus measures, including steps to cope with a strong yen.
Noda's Democrats and a tiny coalition partner lack a majority in parliament's upper house, where the opposition can block legislation.
Noda's immediate challenge is to draft and enact a third emergency budget to finance reconstruction spending.
The LDP has said it would cooperate with the government on reconstruction policies but wants Noda to call a snap general election once necessary rebuilding steps have been taken. No election for parliament's powerful lower house need be held until 2013.
On Wednesday, Noda filled top party posts with a mix of allies and rivals in an effort to promote unity after a divisive leadership contest.
(Additional reporting by Kiyoshi Takenaka and Edmund Klamann; Writing by Rie Ishiguro and Linda Sieg; Editing by Tomasz Janowski and Alex Richardson)
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