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Japan PM Aso calls election, risks historic defeat

JAPANESE cabinet members signed off on Prime Minister Taro Aso's plan to dissolve parliament's lower house today for an election expected on Aug. 30, as polls show his ruling party in danger of a historic defeat.

A victory by the opposition Democratic Party of Japan would end more than 50 years of near-unbroken rule by the conservative Liberal Democratic Party and raise the chances of breaking a political deadlock caused by a divided parliament that has stymied policy implementation as Japan struggles to emerge from recession.

It would also usher in a government pledged to pay more heed to the interests of consumers than companies, to wrest control of policy from bureaucrats to cut waste, and to adopt a diplomatic stance less subservient to close ally the United States.

Many investors in Japanese financial markets would probably welcome an end to the prolonged political stalemate, but some analysts worry that the Democrats' spending plans will inflate an already huge public debt and push up government bond prices.

"I think that for the short-term, hope that the Democrats taking power will cure the parliamentary paralysis and lead to smooth passage of bills and policies will outweigh any worries about uncertainty," said Noritsugu Hirakawa, a strategist at Okasan Securities.

"Over the longer term, there's questions about how the Democrats will fund all their social programmes, and this may eventually weigh on the market."

A spate of opinion polls show the Democrats well ahead of Aso's LDP among voters, though close to 30 percent are still undecided.


Aso's announcement of his election plan last week -- one day after the LDP was trounced in a closely watched Tokyo assembly poll -- sparked chaos in the LDP, with critics trying to oust him from the top party post ahead of the vote.

Party heavyweights blocked the move, but agreed that Aso would appear before LDP lawmakers on Tuesday at a meeting where he was expected to try to restore unity and deflect criticism.

The gathering had been expected to be closed to media to avoid exposing deep divisions, but Chief Cabinet Secretary Takeo Kawamura told a news conference that it would instead be open to allow the party to get its message across to the people.

All cabinet members, including Finance Minister Kaoru Yosano, who some had earlier speculated might refuse, signed off on the election plan on Tuesday, Health Minister Yoichi Masuzoe said.

Aso, the 68-year-old grandson of a prime minister, took office last September and has seen voter support slide due to policy flip-flops, gaffes and scandals.

The Democrats have had their own troubles, with one leader forced to resign in May after a fundraising scandal ensnared a close aide and current party chief Hatoyama under fire from the LDP after admitting some people listed as his political donors were dead.

The LDP has already made clear that it will target Hatoyama's funding affair while attacking the Democrats, an amalgam of former LDP members, ex-socialists and younger conservatives, as weak on security policy and irresponsible on finances.

Aso was also scheduled to give a news conference later in the day. The prime minister may have in mind a news conference by the charismatic Junichiro Koizumi when he called an election in 2005 after LDP rebels rejected his plan to privatise the postal system. Despite early predictions that the LDP would fare badly, Koizumi electrified voters and led the party to a huge victory.


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