Abe is returning to the same post he had held previously after his Liberal Democratic Party won a landslide victory this month in parliamentary elections, which ended the three-year regime of Prime Minister Yoshihiko Noda's Democratic Party of Japan.
Abe becomes Japan's seventh prime minister in six years, an indication of the country's current unstable political scene.
Japanese economy is the world's third largest after that of the United States and China, but it, like its competitors, has been hit by the global crisis and falling exports on which it is heavily dependent. The catastrophic March 2011 earthquake and tsunami has only made the situation worse. The country could be pushed into another recession if the economy in latest quarter ending in December also shows a shrinkage as did the previous one.
Abe's plan to tackle the economy under his "Abenomics" ranges from unlimited monetary easing, big spending on public works and steps to fight deflation to curb the yen's rise, which make Japanese exports more expensive.
Kyodo News reported Abe wants the Bank of Japan to set an inflation target of 2 percent and take drastic monetary easing steps.
Abe's program will be handled by former Prime Minister Taro Aso, expected to become both the new finance minister and deputy prime minister in his Cabinet. Kyodo said Aso took the same bold fiscal steps during the 2008-2009 global financial debacle.
Kyodo said many other positions will also be filled with former Cabinet members who held portfolios before the DPJ's rise to power in 2009. Among them will be former Trade and Industry Minister Akira Amari, expected to take over as minister of economic revitalization, a new post to be created by Abe.
Toshimitsu Motegi, former financial services minister, will become minister of economy, trade and industry, and will handle Japan's future energy policy following the earthquake disaster that crippled the Fukushima Daiichi nuclear plant.
Abe's another immediate challenge will be to guide his party for a strong win also in the elections to the Upper House to be held this summer, so he can pursue his policies without much opposition.
One such policy will be revising Japan's pacifist constitution. The LDP's election manifesto had called for changing the Constitution to recast Japan's Self-Defense Forces as a "national defense military." Under the current pacifist Article 9 of Japan's post-war Constitution, the country renounced war as a means of settling international disputes. It also prohibits Japan from maintaining a military.
Abe is returning to power at time when Japan is involved in a territorial dispute with China over the resource-rich Senkaku Islands in the East China Sea, which is worsening by the day and threatens the security in the region.
Abe also must deal with the growing belligerence of North Korea, whose latest provocation included the Dec. 12 firing of a long-range rocket which was widely condemned by the United Nations and much of the free world.
Kyodo said Abe has promised to strengthen Japan-U.S. ties and to exercise Japan's right to collective self-defense with Washington, which has been banned under the government's interpretation of the Constitution. In this connection, Abe has decided to appoint Fumio Kishida as foreign minister, Kyodo said.
Kyodo, quoting sources, reported Abe has decided to appoint LDP lower house member Itsunori Onodera as defense minister. The 52-year-old Onodera had previously served as parliamentary secretary for foreign affairs and as senior vice foreign minister.