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By JUNKO TAKAHASHI

Staff writer

Prime Minister Junichiro Koizumi on Friday gave the strongest indication so far that he would retain Heizo Takenaka as financial services minister if Koizumi wins next week’s LDP presidential election.

Takenaka, whose reform drive has drawn heavy criticism from some within the Liberal Democratic Party, would then be expected to continue his financial cleanup.

Takenaka is doing a “very good job,” Koizumi said, “and (his reform efforts) are finally showing results.”

Asked if Takenaka’s participation is necessary for pushing forward the reform drive, Koizumi said: “Yes, he has been working hard and I do want him to cooperate with me in any position possible.”

The prime minister’s remarks strongly suggest that he will not yield to voices within the LDP over Takenaka.

Takenaka, an economic professor, has championed Koizumi’s drive to cut government spending and force banks to accelerate their bad-loan writeoffs.

He maintains that the mountains of bad loans are choking the country’s financial system and preventing funds from flowing to startups.

But some senior LDP members, including Mikio Aoki, secretary general of the party’s Upper House caucus, have charged Takenaka with exacerbating the problem and demanded that he be replaced with a Diet member.

When Aoki threw his support to Koizumi in the election, he made it conditional on Koizumi dumping Takenaka. In supporting Koizumi in this way, Aoki gave the cold shoulder to a candidate from his own faction — Takao Fujii.

Takenaka’s fate is now seen as a barometer of which way Koizumi’s economic policies are blowing.

The prime minister also said it was “good” that Takenaka has pulled double duty as minister in charge of economic and fiscal policy for the past year but remained mum on whether Takenaka will retain that post.

“I will decide on that after the election is over,” Koizumi said.

There is a rumor in Nagata-cho that Koizumi will strip Takenaka of one of his portfolios as an olive branch to his LDP critics.

Said Koizumi, “I have no comment to make about whom I will appoint in what post during the election.”