There was a certain perversity in the decision by Japan's ruling Liberal Democratic party to choose Keizo Obuchi as its new leader.

The man picked to replace Ryutaro Hashimoto as Japan's prime minister has been famously described as about as "exciting as cold pizza". He has an undistinguished track record, is depicted by those who know him as dull and indecisive and was, among the three candidates in the contest, by far the least popular with the general public.

And this is the man chosen the day after Moody's, the US credit rating agency, said it was considering downgrading Japan's Aaa rating.

When the Japanese economy was growing fast in the 1980s indecisive leadership never proved much of a handicap. But now, unless Mr Obuchi can deliver on his pledge to "reconstruct the Japanese economy", his own party, the country and indeed, the world, will suffer.

As far as the party is concerned, he has little more than two years before elections for the lower house. With the LDP's ratings in the polls at just 20 per cent, a repeat of the performance during this month's upper house elections would see them swept from power.

As far as everyone else is concerned, failure to address Japan's banking sector problems and revive the economy will further reduce Japan's ability to act as an engine of growth for the rest of the troubled Asian regional economy. It could trigger another round of yen depreciation, putting pressure on other Asian countries' currencies and depressing economic activity elsewhere.

To tackle these formidable tasks, the prime minister will need the ability to devise radical policies and the political power to implement them. That means taking on the powerful interest groups that have consistently blocked attempts at reform.

At first glance, the 61-year-old Mr Obuchi does not appear up to the task. He has been an undistinguished foreign minister and, unusually for a potential Japanese prime minister, has never headed one of the powerful economic ministries. During the run-up to the prime ministerial contest, he was dubbed "Mr Average", and "the noodle shop between the two skyscrapers" (his rivals).

His strongest points are his reputation as a conciliator and his homespun style. After he was elected to parliament in 1963 he caused a stir by bringing his mother with him on his first day in the job. His wife, Chizuko, is said to be too embarrassed to go to the cinema with him for fear that he will cry during the film.

He also has a self-deprecating wit. After the cold pizza jibe, he sent his team out to serve pizzas to journalists waiting outside his house.

"On a personal level, Mr Obuchi is a very good person," says Minoru Morita, a political analyst. "He always says, `thank you' and `see you again'. But it is very difficult to get him to say anything else."

Paradoxically, in spite of his limitations, Mr Obuchi may still be the best man available for the job. His lack of political vision does not distinguish him from rivals. All three candidates were promoting almost identical policies.

All agreed on the need to push on with the so-called bridge bank scheme to restructure the financial system. All proposed a massive fiscal expansion involving tax cuts and a boost in government spending. All want to reverse the fiscal stringency of Mr Hashimoto, the outgoing prime minister.

"Whether it is Obuchi or anybody else is less important than the fact that the LDP realises more needs to be done," says Richard Jerram, chief economist at ING Baring Securities in Tokyo.

Mr Obuchi has pledged to make permanent tax cuts of more than Y6,000 billion (£30 billion), introduce a supplementary budget of Y10,000bn and provide tax breaks on housing loan interest payments.

He also plans to freeze Mr Hashimoto's fiscal reform law, promising to cut the effective corporate tax rate from 46.36 per cent to 40 per cent. Under his proposals, the highest personal income tax rate will be cut from 65 per cent to 50 per cent.

Policy formation, then, should not be the biggest challenge for Mr Obuchi. Rather it will be his ability to implement such policies. This is probably his area of greatest strength.

Unlike the other candidates, Mr Obuchi has strong backing within the party. He has inherited the largest faction in the LDP from Noboru Takeshita, his mentor, when the former prime minister resigned nine years ago to take responsibility for the LDP's poor electoral performance at that time.

In the short term, the biggest risk facing Mr Obuchi and Japan is that the party will split and lose its majority in the lower house. "The key issue," says Jesper Koll, chief economist at J.P. Morgan, "is whether the LDP can maintain party unity. The danger is that with a divided LDP, there will be policy gridlock."

That danger is real. The LDP has a majority of 13 in the lower house. But a group of about 20 young LDP politicians are concerned that with the uncharismatic Mr Obuchi as prime minister they will be unable to hold on to their seats in the coming election. Before the leadership vote, they threatened to leave the party if Mr Obuchi won.

Meanwhile, Seiroku Kajiyama, one of the three candidates who left Mr Obuchi's faction to run against him, has set up a policy study group within the LDP. Such study groups have frequently been the first step in the formation of a new faction, or a new party.

Preventing such defections will be the first big test of Mr Obuchi's leadership.

The next will be fostering co-operation with opposition parties. These have the power to block legislation in the upper house, where the LDP has lost its majority.

For example, Mr Obuchi faces potentially difficult negotiations with the Democratic Party, the largest opposition party, over plans for a bridge bank to take over the assets of failed banks.

The Democratic Party says the LDP's proposals are fundamentally different from what they have in mind.

Affability and a consensual style did not help him win the battle of public opinion. But they may be essential allies in the mountainous task that lies ahead.