Japan's economic ministers experts but no stars

TOKYO, Sep 26 (Reuters) The line-up of Japan's new finance and economic ministers selected by Prime Minister Shinzo Abe today is heavy on expertise but light on star quality.

Questions remain as to how far the new ministers will go towards reducing Japan's mountain of public debt, as they seem inclined to put high growth first and place less emphasis on raising taxes, a step that is generally seen as inevitable to restore the state's finances.

''There are no shining stars in economic portfolios,'' said Jesper Koll, chief economist at Merrill Lynch in Tokyo.

''This is a cabinet where the policy focus is foreign and defence policies, and the management of fiscal and economic affairs is being left on bureaucratic autopilot,'' Koll said.

In a surprise move, Abe picked Koji Omi, 73, as finance minister.

Omi is a former trade ministry bureaucrat and has served as head of now defunct Economic Planning Agency.

After his appointment, Omi vowed to push fiscal reforms and keep new government bond issuance below 30 trillion yen (260 billion dollars) a year in coming years, a policy target that was set by Abe's predecessor Junichiro Koizumi but not achieved during most of his five years in office.

But Omi added that a full-fledged discussion on tax reform, including raising the politically sensitive consumption tax from the current 5 percent, would have to wait another year.

Japan's outstanding public debt is approaching 775 trillion yen (.7 trillion), or 150 percent of gross domestic product, the highest among major industrial nations.

''My first impression is that it looks somewhat backward-looking and that there may be a tough road ahead for the cabinet as well as for the market,'' said Jun Nishizaki, chief portfolio manager at Nissay Asset Management.

Omi also signalled that the government would be less vocal on Bank of Japan monetary policy.

That statement contrasts with calls by some government officials in July for the BOJ to be careful about raising rates. The central bank ignored the calls and raised rates for the first time in six years.

Still, government officials have often argued against overly hasty rate hikes that could derail Japan's economic recovery.

''The BOJ's monetary policy up to date has been appropriate,'' Omi said. ''I do not think it is appropriate for the government to fret over each monetary policy decision made by the BOJ.'' For economics minister, Abe picked Hiroko Ota, a female economics professor who has served as a senior official in the economic research bureau of the cabinet office.

''So far it's expert-oriented but not market-friendly,'' said Tomoko Fujii, senior economist and strategist at Bank of America.

''One of the very important objectives of this cabinet is to survive the upper house election next July, and the opposition party is led by a policy expert,'' Fujii said. ''So that's probably why Abe wanted to appoint policy experts.'' But Kenji Yumoto, chief economist at Japan Research Institute, said Ota for one has enough experience in policy coordination.

''She has experience in pushing forward reforms as a representative of the private sector,'' Yumoto said.

One surprise to markets was that Kaoru Yosano, the market's favourite as economics and financial services minister, was not reappointed to the cabinet.

But Abe selected a political heavyweight, Hakuo Yanagisawa, as health, labour and welfare minister at a time when the country faces a key challenge in dealing with rising social welfare costs amid a declining population.

The new prime minister is often seen as strong on diplomatic issues but not very well versed on economic policies, and economists said his choice of Yasuhisa Shiozaki, a former central banker, as top government spokesman could help.

''Shiozaki has in-depth knowledge of monetary and economics issues, so by assuming the role of cabinet spokesman he may be bearing the task of presenting the government's financial and economic policies in a manner that financial markets will understand appropriately,'' said Masuhisa Kobayashi, chief JGB strategist at Barclays Capital.

Reuters AB DB1807