By Stanley White
TOKYO (Reuters) - Japan's prime minister might replace his finance minister with Katsuya Okada, a newspaper reported on Tuesday, a senior politician in the ruling Democratic Party who shares the view that a strong yen is a threat to the economy.
Okada, deputy prime minister who also serves as a cabinet minister responsible for welfare and tax reform, would replace Jun Azumi as part of a shakeup of the cabinet that could happen as early as October 1, the Sankei reported without citing its sources.
The prime minister, Yoshihiko Noda, has promised to call national elections "soon". Opinion polls suggest the Democratic Party would suffer a heavy defeat in an election, so Okada's time in office would likely be short.
However, a strong yen has left currency markets on edge in case Japan decides to intervene to calm its ascent against the dollar and so relieve pressure on exporters. Okada as finance minister would oversee any intervention.
In an interview with Reuters earlier this year, Okada highlighted the level of the yen as a threat to the economy and outgoing finance minister Azumi said the government's stance on the yen would not change.
"It would be a mistake to assume there will be a vacuum in currency policy because I am changing my post," Azumi, who will be moving to a senior party post as an acting secretary general, told reporters on Tuesday.
The yen traded on Tuesday as high as 77.72 yen per dollar, its highest level since September 14, Reuters data shows. The currency has risen steadily against the dollar since hitting a 2012 low in March of more than 83 per dollar.
Okada has previously served as foreign minister and held other senior posts in the party. He shares Noda's drive for fiscal and tax reform.
"Okada shares views with Noda that we need to reign in budget deficits, so his appointment would signal a continuation in policy," said Masayuki Kichikawa, chief Japan economist at Bank of America Merrill Lynch.
Kichikawa said "almost all politicians now share the view that we need to prevent the yen from rising."
Noda has courted Okada for the finance minister's job before, only for Okada to turn it down.
The cabinet shakeup is expected before Tokyo hosts annual meetings of the International Monetary Fund and World Bank next month.
"We will make sure that my successor is fully prepared to host these international meetings," Azumi said.
Noda promised to hold an election "soon" in return for backing by the opposition for his plan to raise the country's sales tax. It marked a rare break in an otherwise gridlocked parliament but also prompted some 70 lawmakers to leave the ranks of the Democrats.
Noda is making changes to members of the cabinet and senior members of the party as the government eyes an election in coming months.
In previous cabinet shakeups, the Democrats have had difficulty filling the finance minister's post because not many of the party's members have experience suitable for the position.
Before his appointment, Azumi had no noteworthy experience in fiscal policy, financial diplomacy or managing sometimes volatile currency markets.
Still, Azumi took up the role with little disruption and even oversaw currency intervention.
(Editing by Chang-Ran Kim; Editing by Neil Fullick)
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