Eleven ministers from the previous cabinet are staying in new executive, plus six new ones, for a total of 17.
Foreign Minister Katsuya Okada, Defence Minister Toshimi Kitazawa and Transport Minister Seiji Maehara are among those who will keep their jobs.
The important post of Finance minister, which Kan held, has been given to one of his most important aides, 52-year-old Yoshihiko Noda, and a fiscal conservative.
The new government must now try to revitalise Japan’s ailing economy, cutting government debt, which is almost twice the gross domestic product. Tax hikes have not been ruled out.
The new government should be sworn in by Emperor Akihito in an official ceremony to be held late this afternoon in the Imperial Palace.