TOKYO, Sept 4 (Reuters) - Japan's new welfare minister tasked with reforming the country's $1.2 trillion pension fund is a Harvard-educated former central banker with a sharp sense of the reforms that markets want to see and a willingness to buck the system.
Yasuhisa Shiozaki, 63, has a reputation as a policy wonk with a strong resume, but critics say he has sometimes lacked the finesse to navigate ruling party politics.
As head of the Ministry of Health, Welfare and Labor, Shiozaki steps into a crucial role in overseeing a closely watched overhaul of the Government Pension Investment Fund, widely known as GPIF.
He is also under pressure to enact politically unpopular cuts in old-age benefits to stabilise the country's welfare system.
"He is international and an open-minded liberal. That doesn't means he is going to be effective," said Koichi Nakano, a political science professor at Sophia University. "Bureaucrats expect a minister to defend their turf."
Nakano doubted whether Shiozaki's pedigree as a former Bank of Japan official with reform ideas would be enough to guarantee success.
"If it was that simple, policies would have been streamlined years ago."
Shiozaki, like many aides to Prime Minister Shinzo Abe, has said the GPIF's portfolio is too heavily concentrated in Japanese government bonds at some 52 percent of holdings. But health ministry bureaucrats have urged a go-slow approach on GPIF reform, people involved have said.
Prior to Shiozaki's appointment, sources involved in the review of GPIF had told Reuters the fund was finalising plans to boost the weighting of domestic stocks to more than 20 percent from a current 12 percent target.
Shiozaki himself sounded cautious in a news conference on Thursday, saying the priority in overhauling GPIF would be "safe and efficient" asset management.
"It's unknown whether the message coming from Minister Shiozaki will be accompanied by actual change," said Naka Matsuzawa, chief rates strategist at Nomura Securities.
Shiozaki's appointment marks a comeback for a lawmaker with a rebellious streak who joined student protests in the late 1960s.
Markets have been encouraged by his past calls for reforms. Tokyo stocks have risen to seven-month highs, while the yen has fallen near six-year lows.
Shiozaki entered politics when he quit his job at the Bank of Japan after around 10 years to become an aide to his father, who was also a lawmaker. He later ran for the lower house as a candidate in Ehime, his father's former constituency in western Japan.
That was a surprising move for a man who spent his youth in Tokyo reading German philosopher Immanuel Kant in between frequenting jazz clubs.
During high school, he studied for a year in California in 1968. In an interview on his website, Shiozaki says the sense of freedom he experienced that year, in which he attended anti-war rallies and listened to Jimi Hendrix and Pink Floyd, pushed him towards student activism.
He was close friends with musician Ryuichi Sakamoto, who joined him in student protests.
During his early years in politics, Shiozaki was considered one of the LDP's rising stars, with degrees from the University of Tokyo and Harvard's Kennedy School of Government.
But after he was appointed chief cabinet secretary in Abe's previous government in 2006, he was criticised for being part of Abe's "crony cabinet" and part of a clique of LDP politicians who came from politically well-connected families.
That tenure through 2007, in which he declared war on bureaucracy, was marked by a failure to coordinate policy as the government was hit by scandals and gaffes.
Despite his mixed political record, however, Shiozaki's stock rose over the past year.
As a key member of the LDP's "headquarters for Japan's economic revitalization," he helped to draft plans to overhaul GPIF and to bolster corporate governance and return on equity, moves welcomed by global investors and considered some of the highlights of "Abenomics."
Some said pressure from the Abe administration would provide Shiozaki with the support he needs to reform GPIF.
"I think conditions are such that it would be very difficult to undermine reforms," said Kazuhisa Kawakami, political science professor at Meiji Gakuin University. (Additional reporting by Linda Sieg; Editing by Simon Cameron-Moore)