Japan finance minister may be Naoshima, not Fujii: report

Japanese incoming prime minister Yukio Hatoyama (L) meets outgoing Prime Minister Taro Aso at the parliament in Tokyo, September 14, 2009.

TOKYO (Reuters) - Japan's leader-to-be Yukio Hatoyama may choose Masayuki Naoshima, his party's policy chief, as finance minister instead of Hirohisa Fujii, a former finance ministry official, Kyodo news agency reported on Monday.

Fujii, a veteran lawmaker who briefly served as finance minister in the 1990s, has been widely tipped by Japanese media as likely to take the post. Known as a fiscal conservative, he would be welcomed by markets concerned about ballooning public debt as Japan struggles out of recession.

Naoshima is not known for commenting on monetary policy, but has said the Democratic Party's plans for family subisidies and abolishing highway tolls could be funded by tapping reserves and cutting waste in other areas.

One newspaper has said Fujii might be facing opposition from the Democrats' powerful former leader, Ichiro Ozawa, saying it was a sign Hatoyama might have trouble controlling the party after taking office this week.

Hatoyama said he would begin choosing ministers on Tuesday after a meeting of all the party's lawmakers. Some analysts shrugged off media suggestions that he would be controlled by his predecessor.

"It's entertaining to talk about Ozawa doing everything, but I don't think its a big worry," said Yasunori Sone of Keio University.

Kyodo, citing Democratic Party officials, said Naoshima had been almost certain to become economy, trade and industry minister, but may take up the post of finance minister instead.

Asahi TV said Fujii might instead be given the post of deputy cabinet secretary, which would allow him to use his experience to support the prime minister.

The Democrats' two tiny coalition partners are set to get a post apiece in the new cabinet, media reports say.

Shizuka Kamei of the conservative People's New Party may be handed the defense portfolio and Mizuho Fukushima of the Social Democrats may be given roles responsible for policies to raise the birthrate and protect consumers, the Asahi newspaper said.

CUT WASTE TO FUND SPENDING

Naoshima, an upper house lawmaker and a former motor industry union official, has said the Democrats' spending plans could be funded by tapping government reserves and cutting waste, an idea dismissed by critics who say the reserves would quickly dry up.

Naoshima said in July that the party's policies would raise economic growth by two percentage points in the fiscal year from April 2012.

Hatoyama's Democratic Party of Japan (DPJ) beat the Liberal Democratic Party in an election late last month, ousting the conservatives for only the second time in their 54-year history.

He is set to be voted in as prime minister in a special parliamentary session on Wednesday.

Ozawa, whom Hatoyama has already said he will appoint No. 2 in the party, is widely credited with engineering the election victory. Some have expressed concern that he could become a rival power center to the cabinet, muddling policymaking.

Dubbed the "shadow shogun," Ozawa was forced to step down as leader in May over a funding scandal, which could taint the new government's image.

(Additional reporting by Leika Kihara, Isabel Reynolds and Hideyuki Sano; Editing by Rodney Joyce and Ron Popeski)