• Compiled from staff reports

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Prime Minister Junichiro Koizumi retained Financial Services Minister Heizo Takenaka and Foreign Minister Yoriko Kawaguchi after reshuffling his Cabinet on Monday, defying calls for their ouster from within the Liberal Democratic Party.

Apparently feeling bullish after his sweeping victory in the LDP presidential election two days earlier, Koizumi kept Takenaka, seen as a symbol of the prime minister’s economic reform drive, despite mounting demands from LDP veterans that the private sector economist — a champion of austere fiscal policy and tough bank inspections — be replaced.

Takenaka will continue concurrently serving as financial services minister and economic and fiscal policy minister, two posts he has held since September, in the new 17-member Cabinet.

In the wake of the reshuffle, the ruling and opposition parties agreed to convene an extraordinary Diet session Friday that will last 36 days through Oct. 31, lawmakers said.

It had been widely speculated that Koizumi would strip Takenaka of one of the two Cabinet posts in a compromise with LDP lawmakers who backed Koizumi in his re-election bid despite differences over policy matters.

“Looking at the faces of new Cabinet members, you’ll see our policy for reforms stands as firm as rock,” Koizumi told a news conference Monday evening.

Koizumi said he has been consistently convinced that Takenaka’s economic and financial policies are correct. Koizumi boasted that he has defied political pressure to remove Takenaka from the Cabinet.

The lineup “is meant to show the nation that the policy direction of the Koizumi administration has not changed,” the prime minister said triumphantly.

The key economic portfolio of finance minister went to Sadakazu Tanigaki, who was in charge of industrial revitalization in the previous Cabinet.

Tanigaki, who replaces Masajuro Shiokawa, said Koizumi gave him three main tasks:

* Realize a primary budget balance in the early 2010s.

* Reform tax and other revenue structures of the central and local governments.

* Safely manage the increased issuance of government bonds.

Koizumi also rejected a call by many LDP lawmakers to replace Foreign Minister Yoriko Kawaguchi, a former trade ministry bureaucrat who does not hold a Diet seat.

Kawaguchi has been the target of attacks from LDP veterans who want more Cabinet posts to go to Diet members. Koizumi apparently kept her on because the nation is facing difficult diplomatic issues related to North Korea and the planned dispatch of Self-Defense Forces to take part in the reconstruction of Iraq.

Kawaguchi said she will do her best to bring to Japan the families of five former abductees to North Korea. The abductees returned to Japan in October for the first time since being kidnapped to North Korea in 1978, but their North Korean-born children and the American husband of one remained in Pyongyang.

The government will press Pyongyang for more information about the fate of other Japanese abducted to the reclusive state in the 1970s and 1980s, she said.

Koizumi apparently had his way in selecting the members of his new Cabinet after achieving a landslide victory in Saturday’s LDP presidential election, which gave him a new three-year term as party chief.

But Koizumi’s reform drive may face a bumpy road. Koizumi included in his new team some lawmakers who have remained vague about their commitment to his key reform proposals.

Taro Aso, a former LDP policy chief appointed as minister of public management, home affairs, posts and telecommunications, was equally vague about his stance toward the privatization of the nation’s postal services — one of Koizumi’s key election pledges that has been opposed by many within the LDP.

Nobuteru Ishihara, who has served Koizumi as minister in charge of administrative reform since April 2001, was appointed minister of land, infrastructure and transport; he will be in charge of drafting bills for the privatization of four debt-ridden semigovernmental expressway corporations.

During his tenure as minister of administrative reforms, Ishihara was strongly criticized for backing lawmakers who worked for vested interest groups that oppose the privatization of the four expressway corporations.

After being appointed to the new post, Ishihara pledged to proceed with the privatization program as outlined in a final report compiled by a key expert panel under the prime minister in December.

In forming the new Cabinet, Koizumi also gave consideration to a faction led by former LDP policy chief Shizuka Kamei. This faction solidly voted against Koizumi in Saturday’s presidential election.

The new Cabinet includes three Kamei faction members, up from one in the previous lineup.

Meanwhile, in an apparent effort to give the Cabinet a fresh image, Koizumi selected Lower House member Yuriko Koike as environment minister and Senior Vice Foreign Minister Toshimitsu Motegi as minister in charge of Okinawa and northern territories issues.

Both Koike and Motegi are in their third term in the Diet — relatively short careers for ministerial positions, given the LDP’s traditional seniority-based system of advancement.

“I believe (the prime minister) took into consideration what I have achieved over the past year as senior vice foreign minister,” Motegi said.

From New Komeito, the larger of the LDP’s two coalition partners, Chikara Sakaguchi was reappointed minister of health, labor and welfare.

“Issues regarding pension reforms will be my biggest challenge,” Sakaguchi told reporters.

Outgoing Finance Minister Masajuro Shiokawa indicated Monday he may not run in the general election expected to be held in November.

Asked whether he was considering retirement, the 81-year-old lawmaker said: “I myself have already made a decision. But I must take proper procedures. I wouldn’t want my supporters to say, ‘we have supported Shiokawa unconditionally, but there he goes saying something selfish.’ “

He said he would make an announcement on his decision after consulting his supporters.

Shiokawa was speaking at a news conference held shortly after he submitted his resignation, together with other members of Prime Minister Junichiro Koizumi’s Cabinet, ahead of a widely publicized reshuffle.

Shiokawa had announced he was ready to vacate his post after he was hospitalized with an inflamed gallbladder earlier this month.

The illness kept him away from his office for two weeks and caused him to miss two international conferences — a meeting of finance ministers representing the Asia-Pacific Economic Cooperation forum earlier this month in Phuket, Thailand, and a Group of Seven meeting in Dubai on Saturday.

Shiokawa was first elected to the House of Representatives in 1967.

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