Former prime minister Kiichi Miyazawa yesterday agreed to become Japan's next minister of finance in a reluctant decision which saved premier-designate Keizo Obuchi from a serious blow to his fragile credibility.

The decision by the 78-year-old Mr Miyazawa, a former finance minister with close ties to Washington and hefty political clout, came after he insisted for days that he was too old to rescue Japan from recession.

"I have said repeatedly that I should not take this post, and I could make mistakes of judgment because of my age," Mr Miyazawa told reporters after a meeting with Obuchi.

"I will do my best for an economic recovery," he said.

Mr Obuchi told reporters that Mr Mizazawa's agreement was a big first step for him in his preparations to form a new cabinet. "I am glad he agreed to become finance minister to get the nation out of economic crisis," he added.

Markets and trade partners are waiting to see whether Obuchi's cabinet, to be installed today, will take fast, bold action to fix its banking system and the economy, suffering its worst recession since the second world War.

Mr Miyazawa, who has held 13 cabinet posts, including finance minister during the heyday of Japan's late 1980s inflated asset price bubble, will become Japan's oldest finance minister in the post-second world War period.

Daily Nihon Keizai Shimbun said yesterday that a deputy minister might travel to Group of Seven meetings in Mr Miyazawa's place if he took on the job, an arduous one requiring lengthy attendance in parliament and frequent travel abroad.

Forced to resign his finance post in 1988 for his links to the Recruit shares-for-favour scandal, Mr Miyazawa came back three years later as prime minister only to be ousted after 20 months when ruling party defectors supported a no-confidence motion.

That triggered a 1993 general election which saw the Liberal Democratic Party lose, if only briefly, its 40-year grip on power.