Japan's Prime Minister Shinzo Abe reshuffled the cabinet on Wednesday, appointing conservative ally Tomomi Inada as defense minister and retaining the foreign minister, Fumio Kishida.

Abe also retained Finance Minister Taro Aso but appointed Deputy Chief Cabinet Secretary Hiroshige Seko as the economy, trade and industry minister.

Analysts argue that the appointment of Inada may worsen Japan's friction with China. Japan is already at loggerhead with China over disputed islands in the East China Sea and China's expansion in the South China Sea. Moreover, North Korea today fired a ballistic missile that landed 250 km from Japan's coast, creating alarm in Tokyo.

Inada, previously the ruling party policy chief, will be the second woman to hold the defence post.

Other crucial positions in the cabinet remained more-or-less the same, as Abe will be retaining his right-hand man, Chief Cabinet Secretary Yoshihide Suga. Economics Minister Nobuteru Ishihara will also be kept on along with Health, Welfare and Labour Minister Yasuhisa Shiozaki.

However, Tamayo Marukawa, who served as environment minister in the previous cabinet, was appointed the minister in charge of overseeing preparations for Tokyo's Summer Olympic Games in 2020. Shigeru Ishiba, minister for regional revitalisation, also left the cabinet to prepare for replacing Abe as prime minister when his term as LDP leader expires.

Abe also appointed a new LDP executive line-up. Toshihiro Nikai was appointed as LDP secretary general.

This decision, experts say, signals Abe's hopes for a third term, since Nikai has already indicated his support for the extension, which would require a change in party rules.

The reshuffle comes as Abe tries to boost up economic growth, handle multiple diplomatic challenges and eyes the possibility of staying in office.