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Japan's new prime minister – can he fix the economy?

Hatoyama is thinking big on climate change and upending the bureaucracy, but offering little bold direction for ending Japan's extended economic slump. The new PM takes office Wednesday.

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Reaction was positive to the expected appointment of fiscal conservative Hirohisa Fujii as finance minister, a position he held in 1993-94. But Mr. Hatoyama's appointment Tuesday of Shizuka Kamei as minister in charge of financial services and the postal service system has not signaled a major push for change. Mr. Kamei, who will oversee banking, financial, and postal services, opposed the controversial privatization of the postal service under former Prime Minister Junichiro Koizumi.

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And Hatoyama's appointment of former party leader Ichiro Ozawa as DPJ secretary general has raised concerns of a dual power structure within the party.

The DPJ has agreed to form a ruling coalition with two small parties, the Social Democratic Party (SDP) and the People's New Party, to which Kamei belongs, despite disagreements with the left-leaning SDP over issues such as the US military presence in Okinawa.

Eisuke Sakakibara, a former vice-finance minister, and key adviser to the DPJ, expressed his concerns about the DPJ's handling of the economy at a news conference Sept. 9. He urged the new government to spend more than $105 billion to stimulate economic growth.

Some experts point to the need for more fundamental structural change – spurring job creation and overhauling the pension system, which misplaced 50 million pensioners' records, a major scandal in 2007.

"That could finally make more people feel secure and spend more money," says Masaru Kaneko, an economics professor at Keio University in Tokyo.

More Japanese have struggled to make ends meet amid deep pay cuts or abruptly job termination. Insecurity has risen more broadly in recent years as Japanese companies have turned to more part-time, contingent, or temporary workers. Those now constitute one-third of Japan's workforce.

Political stakes could be high

While many voters have indicated that they don't expect huge change from the DPJ, the party still could suffer if it is perceived as offering little different than the LDP.

"The DPJ has to deal with the three challenges at the same time: changing the old government framework; creating new industries and new framework; and taking economic measures," says Mr. Kaneko. "It will be a difficult feat to do the three all together, and it will take at least two to three years to get the first two done."

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