(For more on Japan's election, click [ID:nPOLJP])
* Hatoyama says to form cabinet on Sept. 16 or 17
* Democratic Party discusses economy with BOJ's Shirakawa
* Hatoyama to meet Obama in late September - Japanese media
(Adds Hatoyama comments)
By Yoko Nishikawa and Hideyuki Sano
TOKYO, Sept 1 Japan's Democratic Party, fresh
from a landslide election victory, discussed the country's
struggling economy with the central bank and finance ministry on
Tuesday as the transition to a new government stepped up a gear.
Reviving the economy is a key challenge for the Democratic
Party, with unemployment at a record high and investors concerned
about deflation and whether the new government will raise
spending and further increase Japan's soaring public debt.
Democratic Party leader Yukio Hatoyama told reporters he
would form a cabinet on Sept. 16 or 17 once parliament has
formally voted him in as prime minister. Parliament will meet on
Sept. 16, a senior lawmaker said.
Hatoyama is expected to head to the United States the
following week to make his diplomatic debut at a U.N. General
Assembly meeting and a G20 summit in Pittsburgh.
Japanese media said he would hold talks with U.S. President
Barack Obama during the trip.
That meeting will be closely watched given Hatoyama has said
he wants Japan to forge a more independent stance from close ally
Washington, raising some concerns among investors that ties with
the United States could become strained. [ID:nN31454415]
Hatoyama, who won a sweeping mandate for change in Sunday's
lower house election, exchanged views on the economy with Bank of
Japan Governor Masaaki Shirakawa, although neither gave details
on what they discussed.
Top finance bureaucrat Yasutake Tango met members of the
Democratic Party to talk about the agenda for a meeting of G20
finance ministers in London at the end of the week.
Outgoing Economics Minister Yoshimasa Hayashi warned about
the risks of deflation and urged the new government to consider
carefully its exit strategy from stimulus measures introduced to
help Japan weather the global financial storm. [ID:nT63602]
While investors had sought a clear election outcome,
uncertainty over the new government's direction has weighed on
Japanese stocks .N225. The yen JPY= strengthened on Monday on
the end of the political uncertainty and held its ground on
Tuesday. [.T] [FRX/] FXNEWS
HIGH EXPECTATIONS OF HATOYAMA
The Democrats' historic election win over the long-ruling
Liberal Democratic Party (LDP) broke a deadlock in parliament,
where the opposition had controlled the less-powerful upper
chamber since 2007 and could delay bills.
The Democratic victory was driven more by frustration with
the LDP than broad support for the decade-old opposition,
explaining a lack of post-election euphoria in the world's
Still, 71 percent of voters said they had high expectations
of Hatoyama, a Kyodo news agency opinion poll showed.
Japan's public debt has ballooned to 170 percent of GDP, the
highest among developed nations, due to its repeated attempts to
spend its way out of the economic doldrums.
Some investors are concerned about fiscal discipline under
the Democrats, who have promised policies such as cash handouts
for parents of young children, but the party has said it will
clamp down on spending in other areas to fund its new policies.
The Finance Ministry said for the first four months of the
financial year that it collected only 11.8 percent of the 46.1
trillion yen ($495.4 billion) in tax revenue it estimated for the
general budget as incomes suffered from the financial crisis.
"In the Japanese government bond market, there are concerns
about a possible spike in government debt issuance," said
Noriyuki Fukuda, a fixed-income strategist at Morgan Stanley.
The new government may have to craft an extra budget to cover
an expected tax revenue shortfall. [ID:nT289544]
They will also need to get started on drafting the annual
budget for the year from next April 1, but party leaders have
said they would disregard budget requests from government
ministries compiled on Monday and start them all over again.
(Additional reporting by Isabel Reynolds, Chisa Fujioka, Yoko
Kubota, Rika Otsuka, Elaine Lies and Tetsushi Kajimoto; Editing
by Dean Yates and Hugh Lawson)