'continuity cabinet'

Jesper Koll, senior adviser to asset manager WisdomTree Investments.

Abe's younger brother, Nobuo Kishi, was handed the defence portfolio, while outgoing Defence Minister Taro Kono takes charge of administrative reform, a post he has held before. Yasutoshi Nishimura, Abe's point man on COVID-19 response, remains economy minister, while Trade and Industry Minister Hiroshi Kajiyama, the son of a politician to whom Suga looked up as his mentor, also retains his post. Katsunobu Kato, outgoing health minister and a close Suga ally, takes on the challenging post of chief cabinet secretary. He announced the cabinet lineup.

Tomoya Masanao, head of investment firm PIMCO Japan, said Suga's goal of a more digitalised society could widen the gap between rich and poor and would require political capital. "Abe's administration built political capital for itself with loose monetary and fiscal policies, a balanced and skillful diplomacy with the United States and China, and implementation of flexible domestic politic," he said. "The new administration, on the other hand, faces a rough road ahead."

In a move that resonates with voters, Suga has criticised Japan's top three mobile phone carriers, NTT Docomo Inc, KDDI Corp and SoftBank Corp, saying they should return more money to the public and face more competition.

He has said Japan may eventually need to raise its 10% sales tax to pay for social security, but not for the next decade. Clues as to whether and how Suga will push ahead with reforms could come from the lineup of government advisory panels such as the Council on Economic and Fiscal Policy, Koll said.