Sept. 22 (Bloomberg) -- Heizo Takenaka was reappointed to his positions in charge of banking and economic policy by Prime Minister Junichiro Koizumi and said he'll push ahead with efforts to clean up $384 billion of bad loans at Japanese lenders. ``Bad loans have started to fall significantly,'' Takenaka told reporters in Tokyo after being reappointed Financial Services Minister and minister for economic and fiscal policy. ``It's necessary to continue pushing ahead with restructuring.'' Koizumi reshuffled his Cabinet today in preparation for a general election after keeping his post as head of the ruling Liberal Democratic Party last Saturday. He named Sadakazu Tanigaki, a 58-year lawyer, to replace Masajuro Shiokawa as finance minister.
The appointments signal that Koizumi will take on opponents within his ruling party and fulfill 2 1/2-year old pledges to curb spending, clean up bad loans choking Japan's banks and take other steps to restart the world's second-largest economy after three recessions in 12 years, investors said. ``Keeping Takenaka suggests that Koizumi is set on pursuing the structural reforms that he's made central to his policy,'' said Taiji Yoshida, who helps manage the equivalent of $23.8 billion in assets at Yasuda Capital Management Co. in Tokyo. ``Now the onus is on Koizumi to actually carry out some of the policies that he has been advocating.'' Shizuka Kamei and Takao Fujii, who opposed Koizumi in the leadership race, had said that Takenaka's pressure on Mizuho Financial Group Inc. and other lenders to cut $68 billion of bad loans in the past year pushed companies into bankruptcy and destroyed jobs. Japan's unemployment rate in July stood at 5.3 percent, below a record 5.5 percent in January.
Bank Shares Rise
Shares of Mizuho, UFJ Holdings Inc. and other lenders gained after Takenaka's reappointment. Mizuho traded 1.6 percent higher at 2:25 p.m. in Tokyo, reversing a 4.4 percent decline. UFJ rose 1 percent, after falling as much as 2.9 percent earlier. ``Markets were afraid that reforms in the banking sector would be watered down if a conservative politician took over the banking regulator's job,'' said Nozomu Kunishige, a bank analyst at BNP Paribas Securities Japan. Investor expectations that Koizumi would win the party leadership race and maintain Japan's 18-month economic expansion have helped fuel a 39 percent rally in the Nikkei 225 Stock Average since it fell to a two-decade low on April 28. The Nikkei fell 3.7 percent to 10,534.94 as of 2:29 p.m. in Tokyo trading on investor concern that a surge in the yen would hurt earnings at companies such as Canon Inc.
Yen Gains
The yen had its biggest gain in nine months against the dollar today after the Group of Seven finance ministers called for more flexible exchange rates, prompting analysts to say Japan may scale back sales of its currency. The yen was at 112.38 at 2:29 p.m. in Tokyo from 113.99 in New York on Friday. Japan's economy expanded at an annual rate of 3.9 percent in the second quarter, the fastest pace since Koizumi took office in April 2001, as Toyota Motor Corp., Sharp Corp. and other exporters increased capital investment to meet growing demand for Japanese cars and flat-screen televisions in the U.S. and other markets. Tanigaki, currently in charge of the Industrial Revitalization Corp. of Japan, must pursue two potentially contradictory goals, analysts said: curbing the developed world's largest public debt while also protecting a recovery from the nation's third recession in 12 years. ``Koizumi has already mapped out the country's fiscal and economic policy and promised to keep spending tight, so there is little room left for a new finance minister to maneuver,'' said Akio Yoshino, who helps manage the equivalent of $14 billion in assets at SG Yamaichi Asset Management Co.
Currency Policy
Tanigaki will also direct Japan's currency policy. Japan sold a record 9.03 trillion yen ($80.5 billion) between January and July to stem the yen's strength and protect profits of exporters such as Toyota Motor Corp. and Sharp Corp., whose sales have driven the economic recovery. Shiokawa cut spending on roads, bridges and other public works by 10 percent in the fiscal year that ended on March 31. The cuts angered LDP leaders who have long favored public works spending to stimulate the economy and provide jobs for the one in 10 Japanese workers who make a living in the construction industry. Ministers who retained their posts included Minister of Foreign Affairs Yoriko Kawaguchi; Minister of Health, Labor and Welfare Chikara Sakaguchi; and Shigeru Ishiba, minister of Agriculture, Forestry and Fisheries and head of the Self Defense Agency. Shoichi Nakagawa, a one-time agriculture minister, replaced Takeo Hiranuma at Japan's Ministry of Economy, Trade and Industry. Former LDP policy research committee head Taro Aso took over from Toranosuke Katayama as Minister of Public Management and Home Affairs. Nobuteru Ishihara, former minister in charge of administrative reform, replaced Chikage Ogi as minister of Land, Infrastructure and Transport. //www.bloomberg.com