Japan's Fukuda elected PM, forms new cabinet

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TOKYO, Sep 25 (Reuters) Yasuo Fukuda, a seasoned moderate lawmaker, was chosen Japan's prime minister today, then tapped veteran ministers from his predecessor's cabinet to confront a powerful opposition keen to force an election.

The long-ruling Liberal Democratic Party (LDP) picked 71-year-old Fukuda as its leader to revive party fortunes after a disastrous year of scandals and election defeat under Shinzo Abe, who resigned abruptly on September. 12.

''I call this 'the cabinet with its back to the wall,''' Fukuda told a news conference. ''If we put one foot wrong, the LDP could lose control of the government. It will be a tense time,'' he added, vowing to try to restore the electorate's faith in politics.

Fukuda's selection, with the support of the party's factions, has raised fears of backpedalling on efforts to rein in Japan's huge public debt as a struggling LDP, which has ruled for most of the past five decades, seeks to woo back voters.

A general election is not required until 2009 but could well come much sooner if debate in parliament stalls.

The bespectacled Fukuda, a proponent of warmer ties with Japan's Asian neighbours, bowed and smiled after being voted in as prime minister by the lower house, where the ruling camp has a huge majority.

In a sign of the battles ahead, the opposition-controlled upper house voted for Ichiro Ozawa, 65, leader of the main opposition Democratic Party, but that vote was overruled by the more powerful lower chamber.

Fukuda said he thought he could have fruitful policy discussions with the Democrats and other opposition parties.

''I believe that the peoples' livelihood and the good of the country are at the centre of their thinking,'' he told reporters.

Ozawa said he was ready to talk, but repeated his call for an early election for the lower house.

FAMILIAR FACES The typically bland but sometimes testy Fukuda is the oldest lawmaker to assume the premiership since Kiichi Miyazawa took the post in 1991 at the age of 72, and the first son of a prime minister to hold the post.

Fukuda retained nearly all the ministers, including Finance Minister Fukushiro Nukaga, 63, from Abe's cabinet, which had been reshuffled last month to try to prop up the faltering premier.

He tapped Machimura, 62, an ex-foreign minister and head of the LDP's biggest faction, for the pivotal chief cabinet secretary, and handed diplomacy to ex-defence minister Masahiko Komura, 65, who has held the post before.

Shigeru Ishiba, 50, was tapped to replace Komura as defence chief, a post he has held in the past.

Foreign Minister Taro Aso, Fukuda's sole rival in the LDP leadership race, declined an offer of a cabinet post.

BATTLES AHEAD Looming large among the battles for Fukuda is one over extending beyond Nov. 1 a Japanese naval mission in support of US-led operations that opposition parties do not favour.

The Democrats and their allies won a majority in a July upper house election and can delay legislation, including a bill to extend the mission to refuel coalition ships in the Indian Ocean that close ally Washington is anxious to see continued.

Fukuda will also have to balance calls to pay more heed to rural areas and sectors left behind by reforms begun under Abe's predecessor, Junichiro Koizumi, with the need to rein in spending because of Japan's huge public debt, and find ways to fix social welfare creaking under the weight of a rapidly ageing population.

''He needs to unify the factions or no policy is possible,'' said Martin Schulz, an economist at Fujitsu Research Institute.

''But the pressure is all in the same direction -- from the countryside and the (coalition partner) New Komeito. They need handouts.'' REUTERS JK PM2010

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