UPDATE 5-Japan PM to tap fiscal hawk in new line-up-media

* Yosano may take charge of tax, social security -Kyodo

* Deputy sec-gen Edano seen named cabinet No.2 -media

* Appointments signal Kan serious on fiscal reform-analyst

* PM confirms cabinet revamp on Friday, mum on details
(Adds Kan confirmation of Friday reshuffle)

By Chisa Fujioka and Rie Ishiguro

TOKYO, Jan 13 (BestGrowthStock) – Japan’s prime minister will give
a fiscal hawk a key post when he revamps his cabinet on
Friday, media reported, a move probably meant to show he is
serious about tax reforms needed to curb the country’s huge
public debt.

Prime Minister Naoto Kan will appoint former
administrative reform minister Yukio Edano as his de facto
deputy and offer ex-finance minister Kaoru Yosano, a fiscal
conservative, a government post, Japanese media said a day
ahead of the changes.

“I’m sure it is intended to send a message — that he is
serious about fiscal reform — but it depends on who the other
ministers are,” said Robert Feldman, chief economist at Morgan
Stanley MUFG Securities in Tokyo, referring to Yosano.

Feldman added that Edano, mooted for the No. 2 cabinet
post, had done a good job in his previous government job,
which focused on cutting wasteful spending, and had “very
broad policy experience”. Edano is now deputy secretary
general of the ruling Democratic Party of Japan (DPJ).

Giving Edano the key post could, however, exacerbate a
rift in the ruling party over scandal-tainted strategist
Ichiro Ozawa, since Edano has been a critic of the veteran

Kan confirmed he would present a new cabinet line-up on
Friday. He gave no details but told a news conference that he
and Yosano had similar views on fiscal and social security

Yosano, a vocal advocate of raising Japan’s 5 percent
sales tax, said he had not been approached but echoed Kan’s

“What Prime Minister Kan is saying about fiscal policy,
tax reform and the welfare system are problems that can’t be
avoided. Trade policy is also important,” he told a news

“If I can help on these two issues, I would like to do so
even if it’s from the sidelines,” he said, adding he would
leave the small, conservative Sunrise Party he helped found
last year.


Kan, whose support rates have halved from the 60 percent
enjoyed when he took office last June as Japan’s fifth premier
since 2006, this month again raised the touchy topic of
boosting Japan’s 5 percent sales tax to fund the ballooning
costs of providing social welfare for Japan’s fast-ageing

“The question is whether we can face problems that have
been ignored for 20 years,” Kan told a DPJ convention on

Kan is also pitching the need for trade liberalisation
keenly sought by businesses but opposed by powerful farm

Kan is reshuffling the cabinet largely to replace Chief
Cabinet Secretary Yoshito Sengoku, potentially smoothing the
path for debate on the budget for the year from April when
parliament opens this month.

Parliament’s opposition-controlled upper house passed
non-binding but embarrassing censure motions against Sengoku
and Transport Minister Sumio Mabuchi in November over their
handling of a territorial dispute with China.

Opposition parties have threatened to boycott a debate on
the 2011/12 budget unless the two are sacked.

The government can enact the budget because the DPJ
controls the powerful lower house, but the opposition can
block enabling legislation in the upper chamber.

Mabuchi will also be replaced, Japanese media said.

Kyodo news agency, quoting a lawmaker, said Kan might
appoint Yosano as a cabinet member in charge of tax and social
security issues, health minister or an adviser to the premier.

Yosano, who served as finance minister in 2009 when the
now opposition Liberal Democratic Party was in power, has also
held the posts of chief cabinet secretary and economics

Analysts said Yosano’s appointment would be a sign of
commitment to fiscal reform but would not be enough to
convince markets that the government was willing or able to act.

“Unlike last year, it is no longer enough for the ruling
party to merely draw up agendas towards fiscal restructuring,
reining in debt and securing tax revenue. They have to begin
following through with them,” said Koichi Ono, a senior
strategist at Daiwa Securities Capital Markets.

Private economists largely agree that raising the sales
tax will be essential but many lawmakers, including in the
ruling Democratic Party, fear angering voters, especially
ahead of local elections in April.
(Additional reporting by Leika Kihara, Kiyoshi Takenaka,
Kaori Kaneko and Yoko Kubota; Writing by Linda Sieg; Editing
by Nathan Layne and Tomasz Janowski)