Opposition heading for landslide election win

REUTERS - Japanese voters swept the opposition to a historic victory in Sunday's election, exit polls showed, crushing the long-ruling conservative party and handing the novice Democrats the job of reviving a struggling economy.

The win by the Democratic Party of Japan (DPJ) ends a half-century of almost unbroken rule by the Liberal Democratic Party (LDP) and breaks a deadlock in parliament, ushering in a government pledging to focus spending on consumers, cut wasteful budget outlays and reduce the power of bureaucrats.

But the untested party will have to move quickly to keep support among voters worried about a record jobless rate and a rapidly ageing society that is inflating social security costs.

Exit polls showed the DPJ set for a landslide win, possibly taking two thirds of the seats in parliament's powerful 480-member lower house. That matched earlier forecasts of a drubbing for Prime Minister Taro Aso's LDP.

A senior LDP official acknowledged that the party, in power for all by 10 months since its founding in 1955, was headed for a "historic defeat".

"The predictions by the media were shocking. We had doubts, but now I think they are becoming a reality," said Yoshihide Suga, deputy chairman of the LDP's Election Strategy Council.

The ruling party loss would unravel a three-way partnership between the LDP, big business and bureaucrats that turned Japan into an economic juggernaut after the country's defeat in World War Two. That strategy foundered when Japan's "bubble" economy burst in the late 1980s and growth has stagnated since.

"This is about the end of the post-war political system in Japan," said Gerry Curtis, a Japanese expert at Columbia University. "It marks the end of one long era, and the beginning of another one about which there is a lot of uncertainty."

Financial markets have hoped for an end to the stalemate in parliament, where the Democrats and their allies control the less powerful upper chamber and can delay bills, but bond yields may rise if a new government increases spending.

Yearning for change

Most exit polls showed the LDP winning just over 100 seats, down from 300. Its partner, the New Komeito Party, was expected to win around 20 seats. The Democratic Party had just 115 seats in the lower house ahead of the election.

"I'm happy, but at the same time I'm feeling a sense of big responsibility," Yoshihiko Noda, the Democrats' deputy secretary- general, told TBS television.

Backing for the LDP, which swept to a huge election win in 2005 on charismatic leader Junichiro Koizumi's pledges of reform, has crumbled due to scandals, policy flip-flops and a perceived inability to address the problems of a fast-ageing population.

But backing for the Democrats has been less than exuberant.

"It's going to be challenging for the DPJ to allocate money properly, but I think we should give them a shot," said 38-year-old restaurant owner Yasuhiro Kumazawa. "If it doesn't work out, we can re-elect the LDP again in four years."

Democratic Party leader Yukio Hatoyama, 62, the wealthy grandson of a former prime minister, spoke in sweeping terms on Saturday when he said the election would change Japanese history.

He often invoked the word change during the campaign, a theme that clearly resonated with voters, many of whom were prepared to give the Democrats a chance even if they were unsure the party would pull Japan out of its worst recession in 60 years.

"I don't like what's going on now in this country. Things have to change," said Kazuya Tsuda, a 78-year-old retired doctor in Tokyo who voted for the Democratic Party.

The Democrats have pledged to refocus spending on households with child allowances and aid for farmers while taking control of policy from bureaucrats, often blamed for Japan's failure to tackle problems such as a creaking pension system.

"(The Democrats) are saying that they will escape from bureaucratic dominance of politics, but they must also skilfully use bureaucrats to implement their policies," said Norihiko Narita, a professor at Surugadai University near Tokyo. "How to cooperate with bureaucrats will be a very important point."

Diplomatic shift

The party also wants to forge a diplomatic stance more independent of the United States, raising concerns about possible friction in the alliance. "The LDP is probably going to be missed more in Washington than in Japan," said Michael Auslin at the American Enterprise Institute in Washington.

The opposition party has vowed to build better ties with the rest of Asia, often strained by bitter wartime memories.

"The Democrats have a positive attitude towards relations with China. They are willing to stabilise ties, compared with where they have been previously," said Liu Jiangyong, a Japan expert at Tsinghua University in Beijing.

"But there are still problems in bilateral relations, which need hard work from both sides to resolve."

Economic experts worry spending plans by the Democrats, a mix of former LDP members, ex-Socialists and younger conservatives founded in 1998, will inflate Japan's massive public debt and push up government bond yields.

The party has vowed not to raise the 5 percent sales tax for four years while it focuses on cutting wasteful spending and tackling problems such as a shrinking and greying population.

"The biggest reason was that the LDP wasn't able to fully deliver clear policies to deal with the unprecedented ageing, shrinking population and bring comfort to voters," the LDP's Suga said.

Japan is ageing more quickly than any other rich country, inflating social security costs. More than a quarter of Japanese will be 65 or older by 2015.

The economy returned to growth in the second quarter, mostly because of short-term stimulus around the world, but the jobless rate rose to a record 5.7 percent in July.