After winning over Japan, Hatoyama to try Asia next

SEOUL (Reuters) - Japan's Democratic Party will try to put to rest the ghosts of militarism haunting the country's ties in Asia, reshape regional security and battle economic rival China for political dominance, analysts said.

But the Democrats, who stormed to an election victory on Sunday that marked a sea change in the country's politics, will have to reassure voters at home they are capable of running the world's second biggest economy before they can change its relations with the rest of the world, they said.

"Japan will focus on itself first," said Liu Jiangyong, an expert on Japan at Tsinghua University in Beijing.

"To consolidate power, the Democrats will need a stable foreign policy, especially with the U.S. and China."

Many of Japan's problems with its neighbors have been festering since the end of World War Two, including fights over compensating war victims, territorial rows and what many see as not showing proper contrition for its aggression in China, Korea and other parts of Asia.

Democratic Party leader Yukio Hatoyama, almost certain to be the next prime minister, has made a positive impression on China and South Korea by saying he will not visit the Yasukuni Shrine, seen as a symbol of Japan's past militarism.

Economic powers and major trading partners China and South Korea saw ties with Japan chill during former prime minister Junichiro Koizumi's 2001-2006 tenure when the Liberal Democratic Party (LDP) leader visited Yasukuni, raising concern among business leaders that political tension could hurt their bottom lines.

The conservative LDP, which had almost unbroken rule of Japan for about 50 years, forged close ties with the United States while angering many in the region with sporadic comments over the years seen as justifying militarism.

But now, with the region's export-driven economies trying to find their way out of the global downturn, the Democrats' willingness to confront the wartime past augurs well for smoother economic ties in North Asia, responsible for about one-sixth of the global economy.

"Their foreign policy and domestic economic and political imperatives all point to better relations," said Liu.

Ties with South Korea have been in much better shape since President Lee Myung-bak, a former CEO, took office about 18 months ago and ended the harsh rhetoric of his predecessor toward Japan.

NORTH KOREA DIPLOMACY

The Democrats may also change the dynamics of one of the region's most pressing security problems -- ending North Korea's pursuit of nuclear weapons.

South Korea has criticized Japan for not contributing to a disarmament-for-aid deal struck between the North and five regional powers, with Tokyo saying it would only pitch in after Pyongyang provided answers about Japanese it abducted decades ago.

"If North Korea returns to the six-party talks and show signs of making progress, I think the Hatoyama government could show flexibility with respect to the abduction issue," said Kim Sung-han, a Korea University professor of international relations.

Kim said a Japan led by the Democrats could put Tokyo into stiffer competition for leadership in Asia with Beijing in tackling non-traditional security issues including energy security, green growth, protecting sea lanes and disaster relief.

Hatoyama and the Democrats have called for a new arrangement for Japan's most important security relations with the United States, which for decades has had troops in the country.

The Democrats are seeking greater equality in the relationship that would allow Japan to act with greater flexibility. Some analysts worry that a more assertive Tokyo could lead to strained ties with Washington.

"However, the Democratic Party will probably sing the same tune with the U.S. and move somewhat together regarding North Korea," said Kim Sang-joon, a professor of international relations at Yonsei University in Seoul.

The Democratic Party is an unlikely alliance formed across the political spectrum and it remains to be seen how it will address other regional issues such as often-stalled free trade talks with Australia and South Korea, human rights in China and a fight with Russia over islands seized at the end of World War Two.

"The Democratic Party wants to make a mark, and foreign policy might be one of the areas where they can do it," said Kim of Yonsei.

(Additional reporting by Christine Kim in Seoul, Chris Buckley, Ben Blanchard and Lucy Hornby in Beijing; Editing by Robert Birsel)