Japan's Abe set for second term, to tap allies for cabinet

By Linda Sieg

TOKYO (Reuters) - Shinzo Abe will be voted in as prime minister by parliament's lower house on Wednesday, giving the hawkish lawmaker a second chance at Japan's top job as the country battles deflation and confronts a rising China.

Abe, 58, whose party surged back to power in this month's election, has promised a two-pronged policy of aggressive monetary easing by the Bank of Japan and big fiscal spending by the debt-laden government to slay deflation and rein in the strong yen that makes Japanese exports more costly.

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 by scandals in his cabinet, public outrage over lost pension records and a devastating defeat for his Liberal Democratic Party (LDP) in a 2007 upper house poll.

Abe looks set to pick a slate of close allies leavened by some LDP rivals to fend off the criticism of cronyism that dogged his first administration. Parliament meets from 1 p.m. (0400 GMT).

Japanese media have said Abe will name former prime minister Taro Aso, 72, as finance minister, ex-trade and industry minister Akira Amari as minister in charge of a new economic revival headquarters and policy veteran Toshimitsu Motegi as trade minister. Motegi will also be tasked with formulating energy policy in the aftermath of the Fukushima nuclear disaster last year.

Loyal Abe backer Yoshihide Suga is expected to become 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 have also been floated for posts.

"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."

CHINA TIES, JULY ELECTION

Abe 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.

Japanese media said Abe would appoint two low-profile officials to the foreign and defence portfolios.

Itsunori Onodera, 52, who was senior vice foreign minister in Abe's first cabinet, will become 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 - will be appointed to the top diplomatic post, the reports said.

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 December 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.

"It's the economy, the economy, the economy," an LDP source close to Abe told Reuters. The new government plans to submit an extra budget for the fiscal year to March 31 in late January.

Financial markets expect a budget worth about 10 trillion yen, but the source said no more than half of that would be spent on public works projects, a traditional staple of LDP economic stimulus packages.

(Editing by Dean Yates)

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