TOKYO (Reuters) - Japan dissolved parliament's lower house on Friday for a December 16 election that is likely to return the long-dominant Liberal Democratic Party (LDP) to power with a conservative former prime minister at the helm.
That prospect has prompted concerns that former Prime Minister Shinzo Abe, who polls suggest looks likely to be the next premier, will further fray ties with China, already chilled by a territorial row over a group of islands.
"This fight is about restoring Japan. We will regain a strong economy," Abe, who was prime minister in 2006-2007, told a news conference after the lower house was dissolved.
"We'll restore foreign policy. We will strongly appeal to voters on the need to restore the Japan-U.S. alliance, which was badly damaged by the Democratic Party government.
"That will help us defend our beautiful country, territories and national interests."
Prime Minister Yoshihiko Noda, whose Democratic Party of Japan's (DPJ) has seen its support sink since sweeping to power in a historic victory three years ago, warned of the dangers of just talking tough.
"We have promoted diplomatic and security policy from a broad perspective that is calm and practical," Noda told ruling party MPs. "If we fall into extreme jingoism, Japan itself will be in danger."
Few expect the election to fix a policy stalemate that has plagued the economy as it struggles with an ageing population and the rapid rise of China.
"When politics get chaotic, it is always the people who are sacrificed," Toyota Motor Corp (7203.T) President Akio Toyoda, who heads the auto industry lobby group, told a news conference.
"We want a leader who can understand the difficulties that the people are going through, someone who can lead to create a country and society where those who work hard are rewarded."
QUALIFIED TO LEAD?
Noda, Japan's sixth prime minister in six years and the third since the DPJ's landslide election win, had promised three months ago to set a date for the in exchange for opposition support for his pet policy to double the sales tax by 2015 to curb massive public debt.
This week he made good on that promise, despite pressure from within t he DPJ to delay the vote given the party's standing in polls.
Policies in the spotlight include the role of the central bank in reviving an economy slipping into its fourth recession since 2000, the future of nuclear power after last year's Fukushima disaster, and whether Japan should take part in the Trans-Pacific Partnership, a U.S.-led trade pact that Noda favours joining but which would open up protected markets in Japan.
The LDP said on Friday in a draft of its economic platform that it would do its best to beat deflation, which has dogged Japan for years, and tame the strength of the yen, the source of constant complaints from the country's exporters.
It said it would achieve nominal economic growth of 3 percent or more and revise the Bank of Japan law in a step critics worry would weaken the central bank's independence.
In recent days Abe has called on the central bank to print "unlimited yen" and set interest rates at zero or below zero to boost the economy, remarks that sent the yen falling the most against the dollar since central bank intervention in 2011.
But with policy differences between the main parties in many cases a matter of nuance and degree, some say the biggest election question will be who is best qualified to lead.
"The main issue will be whether we should get rid of the 'incompetent' DPJ and bring experienced people (the LDP) back," said one ruling party lawmaker, speaking privately.
"Or whether because the LDP created the mess, we should have a stronger more intelligent leader, like Hashimoto," the lawmaker added, referring to p o pular Osaka Mayor Toru Hashimoto, who leads the small Japan Restoration Party.
The DPJ took power in 2009 pledging to pay more heed to the interests of consumers and workers than corporations and give control of policy to politicians rather than bureaucrats.
Hopes of meeting those pledges faded after the first DJP premier, Yukio Hatoyama, squandered political capital in a failed attempt to move a U.S. airbase off Japan's Okinawa island.
Successor Naoto Kan led the party to an upper house election defeat in 2010 and then struggled to cope with the huge earthquake, tsunami and nuclear crises in 2011.
With the party's prospects dim, DPJ lawmakers were scrambling to defect. The Asahi newspaper said at least nine of its 244 members in the 480-seat lower house planned to bolt.
Smaller parties are scrambling to try to join forces despite major gaps in their policies and competition over who would lead the bigger bloc.
The LDP looks likely to win the most seats in the lower house poll but a lack of voter enthusiasm makes it uncertain whether the party and its former junior partner, the New Komeito party, can win a majority.
If not, the LDP will need to seek another coalition partner either from among a string of new, small parties, or even what's left of the DPJ after the election.
That latter option is less unlikely than it might seem at first blush. The LDP and DPJ lack stark policy differences, especially since Noda - a conservative on both fiscal and security matters - took the helm of what began as a centre-left party in 1996. The party's membership has been whittled by a series of defections over Noda's policies. (Additional reporting by Yoko Kubota; Editing by Neil Fullick)
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