* Abe promises aggressive monetary, fiscal policies
* Yen hits 20-month low on "Abenomics" expecations
* Abe appoints lots of right-leaning allies to cabinet
By Linda Sieg and Kiyoshi Takenaka
TOKYO, Dec 26 New Japanese Prime Minister Shinzo
Abe unveiled a cabinet stacked with close allies on Wednesday,
kicking off a second administration committed to battling
deflation and coping with the challenge of a rising China.
Abe, 58, has promised aggressive monetary easing by the Bank
of Japan and big fiscal spending by the debt-laden government to
slay deflation and weaken the yen to make Japanese exports more
The grandson of a former prime minister, Abe has staged a
stunning comeback five years after abruptly resigning as premier
in the wake of a one-year term troubled partly by scandals in
his cabinet and public outrage over lost pension records.
"I want to learn from the experience of my previous
administration, including the setbacks, and aim for a stable
government," Abe told reporters before parliament's lower house
voted him in as Japan's seventh prime minister in six years.
The vote was a formality after Abe's Liberal Democratic
Party (LDP) surged back to power in this month's election, three
years after a crushing defeat at the hands of the novice
Democratic Party of Japan. Abe was to be confirmed by Emperor
Akihito later in the day, another formality.
CLOSE ALLIES, PARTY RIVALS
Abe appointed a cabinet of close allies leavened by some LDP
rivals to fend off the criticism of cronyism that dogged his
Former prime minister Taro Aso, 72, was named finance
minister and also received the financial services portfolio.
Ex-trade and industry minister Akira Amari becomes minister
for economic revival while policy veteran Toshimitsu Motegi
takes over as trade minister. Motegi is also be tasked with
formulating energy policy in the aftermath of the Fukushima
nuclear disaster last year.
Loyal Abe backer Yoshihide Suga was appointed chief cabinet
secretary, a key post combining the job of top government
spokesman with responsibility for coordinating among ministries.
Others who share Abe's agenda to revise the pacifist
constitution and rewrite Japan's wartime history with a less
apologetic tone were also given posts, including conservative
lawmaker Hakubun Shimomura as education minister.
"These are really LDP right-wingers and close friends of
Abe," said Sophia University professor Koichi Nakano. "It really
doesn't look very fresh at all."
Fiscal hawk Sadakazu Tanigaki, whom Abe replaced as LDP
leader in September, becomes justice minister while two rivals
who ran unsuccessfully in that party race - Yoshimasa Hayashi
and Nobuteru Ishihara - got the agriculture and
environment/nuclear crisis portfolios respectively.
CENTRAL BANK THREATENED
The yen has weakened about 9.8 percent against the dollar
since Abe was elected LDP leader in September. On Wednesday, it
hit a 20-month low of 85.38 yen against the greenback on
expectations of aggressive monetary policy easing.
Abe has threatened to revise a law guaranteeing the Bank of
Japan's (BOJ) independence if it refuses to set a 2 percent
BOJ minutes released on Wednesday showed the central bank
was already pondering policy options in November, concerned
about looming risks to the economy. The BOJ stood pat at its
November rate review meeting but eased this month in response to
intensifying pressure from Abe.
Abe also promised during the election campaign to take a
tough stance in territorial rows with China and South Korea over
separate chains of tiny islands, while placing priority on
strengthening Japan's alliance with the United States.
Abe appointed two low-profile officials to the foreign and
Itsunori Onodera, 52, who was senior vice foreign minister
in Abe's first cabinet, becomes defence minister while Fumio
Kishida, 55, a former state minister for issues related to
Okinawa island - host to the bulk of U.S. forces in Japan - was
appointed to the top diplomatic post.
Abe, who hails from a wealthy political family, made his
first overseas visit to China to repair chilly ties when he took
office in 2006, but has said his first trip this time will be to
the United States.
He may, however, put contentious issues that could upset key
trade partner China and fellow-U.S. ally South Korea on the
backburner to concentrate on boosting the economy, now in its
fourth recession since 2000, ahead of an election for
parliament's upper house in July.
The LDP and its small ally, the New Komeito party, won a
two-thirds majority in the 480-seat lower house in the Dec. 16
election. That allows the lower house to enact bills rejected by
the upper house, where the LDP-led block lacks a majority.
But the process is cumbersome, so the LDP is keen to win a
majority in the upper house to end the parliamentary deadlock
that has plagued successive governments since 2007.
"The LDP is still under the critical eyes of the public. We
need to earn their trust by getting things done one by one," Abe
told party lawmakers ahead of the lower house vote.
"First on the agenda is economic recovery, beating deflation
and correcting a firm yen and getting the economy back on the
growth path. If we don't pursue this target, an upper house
election next year will be a tough one for us."
In a sign of the "twisted parliament" Abe confronts, he was
voted in with a whopping 328 votes in the powerful 480-seat
lower house, but failed to win a first round vote in the upper
chamber. He defeated new opposition Democratic Party chief Banri
Kaieda in a run-off.