TOKYO, JAPAN - JAPAN'S cabinet resigned Friday, paving the way for a reshuffle by Prime Minister Yasuo Fukuda later in the day, the incumbent health minister said.

Mr Fukuda convened the cabinet for a brief meeting at which all of the ministers quit.

'He just told us thank you for our service,' Mr Yoichi Masuzoe, the incumbent health minister, told reporters afterwards.

Mr Fukuda, whose ratings are languishing around 25 per cent amid complaints that he is indecisive, will tap current party secretary-general and former finance ministry bureaucrat Bunmei Ibuki for finance minister, private broadcaster NTV said.

Mr Fukuda probably wants to draw on Mr Aso's popularity to improve the ruling bloc's chances in a general election that must be held by September 2009 and could well come sooner, analysts said.

But a new line-up, which Japanese media said would probably see Mr Fukuda replace more than half of his cabinet, was unlikely to end speculation over a snap election and could leave unclear the direction of policy as the global credit crisis hits the economy.

Mr Ibuki earlier told reporters that Mr Fukuda wanted the new cabinet to tackle the economic pain from high commodity prices.

'As we are facing difficulty with the direction of the economy, including rising raw material prices, although there are relatively few Japan-led factors, we need to address this issue', he said.

'Also, we need to restructure the country's economic system in response to structural changes from an ageing society and a declining birthrate.'

Yosano picked as Japan economics minister
Mr Kaoru Yosano, a veteran politician who favours raising the national consumption tax as a way to repair Japan's tattered state finances, will become economics minister in Mr Fukuda's reshuffled cabinet, Kyodo news reported on Friday.

Seen as a possible successor to the unpopular Mr Fukuda, Yosano,69, has held several cabinet posts and is also a supporter of an independent central bank, in contrast to some ruling party lawmakers who want to use interest rates to promote growth.

The ruling bloc is currently split over whether to focus on ways to promote growth of the flagging economy or rein in the bulging public debt and find new revenue sources such as a higher sales tax to fund rising welfare costs from an ageing population.

The economics minister, previously Ms Hiroko Ota, oversees Japan's economic conditions as well as policy and acts as a spokesperson for the government's top economic advisory panel headed by the prime minister, but is not the main finance minister.

Campaign Strategy
Mr Fukuda wants to erase doubts about his leadership skills and boost the low ratings that threaten his grip on power after just 10 months in office, although a delay in deciding on the reshuffle has reinforced charges of indecisiveness.

A revamped cabinet, however, would not alter the reality in parliament, where a feisty opposition controls the upper house and has made no secret of its desire for an early poll in hopes of ousting Mr Fukuda's long-ruling Liberal Democratic Party (LDP).

Mr Aso would become the LDP's secretary general while Mr Nobutaka Machimura would retain the key post of chief cabinet secretary, Kyodo news agency said.

As secretary general, the party's No. 2 figure, the outspoken Mr Aso would play a vital role in setting election campaign strategy.

'This reshuffle is the first opportunity to show 'Fukuda colour',' the Nikkei business daily said in an editorial.

'The biggest question is whether he can clarify his policy objectives and create a set-up to face the next general lection.' Speculation is simmering that Mr Fukuda - or his successor - might go to the polls earlier to seek a mandate to break the parliamentary deadlock that is stymying policies from security to welfare and tax reform.

Mr Fukuda may keep Mr Masuzoe, but under a different portfolio, the Nikkei said, while media have also said Mr Fukuda could draft more women to try to please female voters.