Japan PM Aso calls election, risks defeat

By Yoko Kubota and Yoko Nishikawa

TOKYO (Reuters) - Japanese cabinet members signed off on Prime Minister Taro Aso's plan to dissolve parliament's lower house on Tuesday for an election expected on August 30, as polls show his ruling party in danger of a historic defeat.

A victory by opposition Democratic Party of Japan would end more than 50 years of almost unbroken rule by the conservative Liberal Democratic Party and raise the chances of breaking a political deadlock that has stymied policy implementation as Japan struggles to emerge from recession.

It would also usher in a government pledged to pay more heed to the interests of consumers than companies, to wrest control of policy from bureaucrats to cut waste, and to adopt a diplomatic stance less subservient to close ally the United States.

Many investors in Japanese financial markets would probably welcome an end to the prolonged political stalemate, but some analysts worry that the Democrats' spending plans will inflate an already huge public debt and push up government bond prices.

A spate of opinion polls show the Democrats well ahead of Aso's LDP among voters, though close to 30 percent are still undecided.

Aso's announcement of his election plan last week -- one day after the LDP was trounced in a closely watched Tokyo assembly poll -- sparked chaos in the LDP, with critics trying to oust him from the top party post ahead of the vote.

Party heavyweights blocked the move, but agreed that Aso would appear before LDP lawmakers on Tuesday at a meeting where he was expected to try to restore unity and deflect criticism.

In a sign the party feared exposing its deep divisions, however, the gathering was to be closed to media.