INSTANT VIEW: Embattled Japan PM Aso seeks Aug 30 election

TOKYO (Reuters) - Japan's embattled Prime Minister Taro Aso is expected to call a general election for August 30, a ruling party official told reporters on Monday, despite opposition from his own party and coalition partner.

Japan LDP secretary-general Hiroyuki Hosoda said a preliminary decision had been made to hold an election on that date.

Talk of an election, due by October, or the possible replacement of Aso escalated after the ruling bloc suffered a big defeat in a Tokyo election on Sunday.

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KEY POINTS:

-- A win for the opposition Democratic Party (DPJ) in a lower house vote would end a half-century of nearly unbroken rule by the conservative Liberal Democratic Party (LDP) and resolve a deadlock in a divided parliament as Japan tries to recover from recession.

-- Japan's main opposition party leads the LDP in newspaper polls. For a graphic tracking the polls click: here

COMMENTARY:

NORIHIRO TSURUTA, CHIEF STRATEGIST, SHINKO RESEARCH INSTITUTE

"The government will announce April-June gross domestic product on August 17, and the numbers are likely to show a return to growth. That's about the only thing the LDP could claim as an achievement.

"The LDP is in a very severe situation and their general election results are likely to mirror the results in the Tokyo assembly elections. The party's old policy hands could lose their seats, which could render the party unable to function. It also seems that the LDP is splitting apart. If you're going to change Japan you should do it sooner rather than later.

"We can't fully price in the impact of the Democratic Party taking control. The most immediate impact will be how they compile the budget, which will focus a lot more on the economy. On foreign policy, the Democrats aren't united, and this could be a risk."

TAKAFUMI YAMAWAKI, SENIOR BOND STRATEGIST, BNP PARIBAS

"The timing of the election had limited impact on markets as investors knew the event was taking place sooner or later. The JGB market's focal point is now shifting to when the Democratic party's will unveil its campaign promises as the possibility of the DPJ coming to the power has greatly increased."

"Investors will watch how much the government's fiscal spending would be boosted or cut by the DPJ's policy. That would become clearer as the DPJ members are expected to discuss it actively over the next week or two."

NIKHILESH BHATTACHARYYA, ECONOMIST WITH MOODY'S ECONOMY.COM,

SYDNEY

"Its very hard to gauge what they (DPJ) will do until they actually come to power. My suspicion is it won't be too different in terms of trade policy and environmental issues. They have said they will ask the U.S. to issue debt in yen rather than US dollars but I don't think they will actually do it. It's mainly the domestic policies that need to be changed in Japan.

"The Democratic Party has not been giving too many details about what policies they will adopt. They have said they will make the public sector more accountable without giving steps as to how they will do that.

"Its hard to gauge the implications of an opposition victory until we have details of how they will implement policies."

JUN KATO, SENIOR CHIEF ANALYST, SHINKIN CENTRAL BANK RESEARCH

INSTITUTE

"I think an election will be positive for Japan's stocks from a medium- to long-term perspective. Overseas investors may look at Japan's political turmoil but ... hopes that Japan will escape from old-style politics and that the parliamentary deadlock will be solved will help the market.

CALLUM HENDERSON, HEAD OF CURRENCY STRATEGY, STANDARD

CHARTERED BANK, SINGAPORE

"Markets are taking a wait-and-see attitude. The initial reaction to the election announcement was JPY negative, but those losses were quickly wiped out.

"Looks as if dollar-yen remains offered for now ahead of 91.30 support."

MAKOTO YAMASHITA, STRATEGIST FOR DEUTSCHE SECURITIES

"The initial reaction in the bond market will need to be largely dependent on movements in stocks and the yen because a general election itself does not really change the outlook on economic fundamentals.

"The market is likely to watch how the opposition party will execute political pledges, including fiscal spending plans, if they win a general election.

"It will be negative for JGBs if expectations grow that more debt issuance will be necessary to make their spending plans to reality. However, the party's current pledges look having focus more on cutting wasteful government spending instead of aiming at expanding growth with boosted spending, that in turn could be positive for JGBs."

NAOMI HASEGAWA, SENIOR FIXED INCOME STRATEGIST, MITSUBISHI

UFJ SECURITIES

"The market generally expects the LDP to lose the election and a Democrat-led government to be set up, but it is difficult to determine whether such a scenario is a buy or sell factor until the details of the Democrats' manifesto are revealed.

"Even if the Democrats were to take power, they may be forced to pursue populist policies until next year's upper house election, meaning that fiscal discipline could be pushed back, which would be negative for the bond market. "What is most important is the prospects for the economy -- if the Democrats, who have opposed a supplementary budget, freeze that budget, it could undermine the economic recovery in the near-term. That would be a plus for the bond market."

HIDEO KUMANO, CHIEF ECONOMIST, DAI-ICHI LIFE RESEARCH

INSTITUTE

"This move adds political uncertainty to the mix, on top of the uncertainties about the future of the U.S. economy. Markets don't like uncertainty and the fog has just gotten thicker.

"Attention will be on the feasibility of the DPJ's policy manifesto, and how they mean to fund some of the projects that are on the table. If they are saying they are going to tap the foreign exchange funds special account, they would be counting on a fund that is yielding a capital loss.

"You can argue that it doesn't make much of a difference which party is in power, but you could also say that a general election will force both the LDP and the DPJ to show that they are the party more likely to change.

GERRY CURTIS, POLITICAL SCIENCE PROFESSOR, COLUMBIA

UNIVERSITY

"There is always a chance that the DPJ will do something to alienate voters but if they don't do something outrageous, there is a very good chance they are going to win."

"The betting has to be that the next government will be controlled by the DPJ."