Analysis: Japan's new cabinet likely to be long on loyalty, short on reform

Fri Dec 21, 2012 1:03am EST
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By Linda Sieg

TOKYO (Reuters) - Incoming Japanese Prime Minister Shinzo Abe's cabinet looks likely to be heavy on close allies, with a few party rivals added to fend off criticism of cronyism, but few see signs that the line-up will produce creative reform policies.

Abe, who will be voted in as prime minister on Wednesday following his conservative Liberal Democratic Party's (LDP) sweeping election win, has made clear his top priority is to slay deflation with a huge dose of monetary easing and spending.

To assist with that task, the 58-year-old Abe, who served as premier from 2006-2007, will tap former prime minister Taro Aso as finance minister and ex-trade minister Akira Amari for a new "Economic Revival" portfolio, Japanese media reported this week.

Both are close allies who share Abe's affection for reflationary policies, including heavy pressure on the Bank of Japan to take more drastic action to beat deflation.

Bowing to such pressure, the central bank on Thursday delivered its third shot of monetary stimulus in four months and signaled it might set a higher inflation target at its January meeting [ID:nL4N09U0BL].

"It's deja vu all over again," said Brad Glosserman, executive director of the Honolulu-based Pacific Forum CSIS think tank. "He (Abe) is a real Japanese economic traditionalist - inflate the economy to try to get growth but don't try anything that will upset the proverbial apple cart."

Among the changes Abe is not expected to tackle swiftly, if at all, are deregulation of sectors such as child-care, medical care, the labor market and agriculture, and participation in a U.S.-led trade pact. Vital reform of the creaking social welfare system is likely to be put off at least until after a July election for parliament's upper house.

Loyal Abe backer Yoshihide Suga is expected to become chief cabinet secretary, a key post combining the job of top government spokesman with coordinating among ministries.   Continued...

Shinzo Abe, Japan's incoming prime minister and the leader of Liberal Democratic Party (LDP), walks past his portrait after attending a meeting at the LDP headquarters in Tokyo December 21, 2012. REUTERS/Toru Hanai