Aso, 68, the country's first Roman Catholic premier, was voted in as leader of the Liberal Democratic Party earlier in the day, taking over from the centrist Yasuo Fukuda, who resigned along with his cabinet on September 1 after a turbulent year in office.
Fukuda's decision to make way for Aso was seen as an attempt to boost the party's chances of winning the upcoming general election, which is not officially due until next September but is likely to be called before the end of this year.
The ex-premier saw his popularity plummet after he introduced a controversial medical plan raising costs for the elderly.
The new prime minister is under strong pressure to call an early election to capitalize on the party's expected rise in popularity following the change of cabinet and the announcement of new measures to rescue the economy.
The ruling party has a strong majority in the lower house of parliament, but the opposition Democratic Party of Japan, which has controlled the upper house since last year, maintains a clear lead in the opinion polls.
In a bid to garner public support, Aso is set to implement an emergency economic package to ease pressures brought on by the U.S. financial crisis.
The new premier was a member of the Japanese shooting team at the 1976 Summer Olympics. He is also a keen manga fan, and last year as foreign minister set up the International Manga Award. As a post-grad student, he studied at Stanford University in California and at the London School of Economics.
State TV channel NHK announced Aso's new cabinet lineup, to be officially confirmed later on Wednesday. The new foreign minister will be Hirofumi Nakasone, son of the 1980s prime minister Yasuhiro Nakasone, and the finance minister will be Shoichi Nakagawa, who like Aso has called for radical new policies to kick-start the economy.
Later on Wednesday, the premier and his new cabinet will be ceremonially appointed by Emperor Akihito.
