Tokyo Report: Stock Market Reacts Coolly to Aso Cabinet

Tokyo, Sept. 29 (Jiji Press)--The Tokyo stock market has reacted
unenthusiastically to the new cabinet formed by Liberal Democratic Party
President Taro Aso following his election by the Diet, or parliament, on
Wednesday as Japan's prime minister to succeed Yasuo Fukuda.

Securities industry officials and investors pinned high hopes on
Aso during the initial phase of the LDP's presidential election because of
his call for greater tax breaks for securities investment.
But expectations waned rapidly following the collapse of major U.S.
brokerage house Lehman Brothers Holdings Inc.
On Wednesday, the benchmark 225-issue Nikkei stock price average
opened sharply lower as reports on stalled negotiations between the U.S.
government and Congress on a huge financial sector bailout plan deepened
market concerns about the U.S. financial situation.
The Nikkei average staged a sharp rally before the end of the day's
session, reflecting expectations of earnings gains at major Japanese
financial institutions set to take the offensive in global financial
industry realignment. The creation of the Aso cabinet hardly affected stock
trading on the Tokyo market, brokers said.
Stock market participants were closely following developments in
talks on the bailout plan in Washington. In addition, the Japanese Diet is
increasingly expected to be dissolved soon for a general election, so "we
cannot afford to be watchful" about the new cabinet's uncertain domestic
policies, a brokerage house official said.
Furthermore, the lineup of the Aso cabinet is considered unbalanced
by the market, as Economic and Fiscal Policy Minister Kaoru Yosano is the
sole influential member in favor of fiscal rehabilitation. The government
may go for "pork barrel spending," warns an official at a major securities
company.
With reform-minded former Prime Minister Junichiro Koizumi having
decided to retire from politics, there also is growing concern in the market
that the already weakening momentum for reform will lose further steam.
In particular, skeptics raise questions about Aso's appointment of
Shoichi Nakagawa as finance minister doubling as financial services
minister. When Nakagawa was the LDP's policy chief, he repeatedly called for
Japan to go nuclear but failed to exercise leadership on economic and fiscal
issues such as freeing up revenue from road-related taxes for use in general
policy spending,
"I doubt if he can help (Japan) overcome the current crisis," an
official at an online brokerage house says.