TOKYO, June 6 (Reuters) - Japan's new leader, Naoto Kan, will pick a like-minded fiscal conservative for the key finance post and a critic of an unpopular powerbroker as his party No. 2, media said on Sunday.
Support for the ruling Democratic Party of Japan (DPJ) has jumped since the Democrats voted in Kan on Friday to replace Yukio Hatoyama, who quit as premier after just eight months in office, his ratings shredded by indecision and broken promises.
A voter survey by the Mainichi newspaper showed 63 percent had positive expectations for Kan’s government, to be launched on Tuesday. That was in line with other surveys.
Thirty-four percent planned to vote for the DPJ in an upper house election expected in July that the ruling bloc needs to win to avoid policy paralysis as Japan struggles to rein in a huge debt and sustain growth despite a fast-ageing population.
That was a rise from 22 percent last month and twice the number who plan to vote for the opposition Liberal Democratic Party, ousted last year in a historic election that ended more than 50 years of almost non-stop rule by the conservative party.
The rise of Kan, a party heavyweight and former grassroots activist, to the nation’s top job has raised hopes of bolder steps to rein in a public debt already twice the size of GDP.
Those hopes will be bolstered by Kan’s promotion of deputy finance minister Yoshihiko Noda to the top finance portfolio, since Noda shares the view that fixing tattered state finances is among Japan’s top policy priorities.
Kan told reporters late on Saturday that he had asked National Strategy Minister Yoshito Sengoku to be chief cabinet secretary — a critical portfolio — and media said he would probably make fiscal reformer Koichiro Genba DPJ policy chief.
Both are positive about raising Japan’s 5 percent sales tax in the future to fund the bulging costs of an ageing society and to reduce dependence on borrowing to fund spending.
"We promised not to raise the sales tax until the next general election so we cannot. But after the next general election, we must speedily carry out drastic tax reform including the sales tax and we must state that in our manifesto for the upper house election," Genba said in a TV debate on Sunday.
An election for the lower house must be held by late 2013.
Kan also said he would appoint administrative reform minister Yukio Edano to replace veteran campaign strategist Ichiro Ozawa as party secretary-general, the party’s No.2 executive. This is the latest sign that Kan is distancing himself from the powerful lawmaker whose scandal-tainted image helped erode voter support.
The extent of Ozawa’s influence matters not only to voters worried that he is reviving the pork-barrel spending and vested interest politics perfected by the LDP during its half-century rule, but to financial markets concerned about Japan’s debt.
"We must show the markets that our finances are sustainable," Genba said in the TV debate with opposition party lawmakers.
Ozawa, who leads the largest bloc of lawmakers in the Democratic Party, has opposed a clear statement on the sales tax ahead of the upper house election for fear of losing votes.
Analysts said that Ozawa, a former LDP heavyweight who left the then-ruling party in 1993 and spent the subsequent years striving to create a viable alternative, was unlikely to be completely sidelined regardless of his lack of an official post.
That could spell headaches for Kan, sooner if Ozawa schemes behind the scenes, and later if the Democrats fail to perform well in the upper house election.
The party will stay in power regardless of the outcome, by virtue of its huge majority in parliament’s lower house. But without an outright majority in the upper chamber, it is likely to have to revamp its coalition with the tiny conservative People’s New Party to get the votes needed to pass laws smoothly.
In a sign he was far from silenced, Ozawa told supporters late on Friday: "Only by winning the upper house election and stabilising the change in government can we achieve truly meaningful reform.
"At that time, I want to fight standing at the forefront."
Media said Kan would keep many ministers, including Foreign Minister Katsuya Okada, in their posts.
Okada faces the tough task of helping Kan keep ties with close ally the United States on track, since an agreement to keep a U.S. airbase on Okinawa island — forged amid controversy in Hatoyama’s final days — faces stiff local opposition.
