Japan PM seeks Aug 30 poll despite grim prospects

By Chisa Fujioka and Yoko Kubota

TOKYO (Reuters) - Japanese Prime Minister Taro Aso said on Monday he plans to call a general election on August 30, despite the prospect that his long-ruling conservative party is headed for a historic defeat.

A Democratic Party victory in the national election would end half a century of nearly unbroken rule by the business-friendly Liberal Democratic Party and raise the chance of resolving political deadlocks as Japan tries to recover from its worst recession since World War Two.

The decision to call the vote, which must be held by October anyway, follows a crushing loss for the unpopular Aso's ruling party in a Tokyo election on Sunday that was seen as a barometer for the national poll.

"One never knows until an election what will happen," Aso told reporters. "This time is no exception. We must fight even in a difficult situation."

Parliament's lower house would be dissolved next week to set the stage for the election, Hiroyuki Hosoda, secretary-general of Aso's LDP, told reporters.

Moves within the LDP to replace Aso had been expected to grow after the party and its junior partner lost their majority in the Tokyo assembly, and some Aso critics refused to give up.

"Before the election we should chose a new 'pitcher', properly announce policies and then seek the people's mandate," former LDP secretary-general Tsutomu Takebe told a TV show.

But Japan has had four LDP leaders in four years, and a survey by NHK public TV said nearly 80 percent of voters were negative toward another change.

Tokyo's Nikkei share average slid 2.6 percent to its lowest close in eight weeks, hurt by the growing political uncertainty.

Some financial market experts were disappointed the election would not be held sooner. "The market has started factoring in a change of government, but the longer the wait, the more the political and economic uncertainty grows," said Susumu Kato, chief economist at Calyon Capital Markets Japan.

FOCUS ON CHANGE

Chaos has gripped the LDP, with Aso's critics inside the party speaking of ditching him while the party's campaign strategist had tried to draft an ex-comedian for its ticket.

"If things go on as they are, this will be a severe defeat," said Katsuhiko Nakamura, director of research at think tank Asian Forum Japan.

"The focus is on who can change the situation, and the LDP will have trouble convincing people they can change things."

The Democrats have pledged to pay more heed to the rights of consumers and workers than those of corporations and to pry policy-making decisions out of the hands of bureaucrats as a way to reduce wasteful spending.