Japan has experienced a political earthquake last Sunday.

Japan’s 45th Lower House elections marked the end of almost 54 years of uninterrupted rule of the Liberal-Democratic Party (LDP). The Democratic Party of Japan (DPJ), led by 62-year old Yukio Hatoyama won 308 of the 480 seats in the Lower House while the LDP won a mere 119 seats down from 300 it held before. A landslide victory for the DPJ and the worst electoral setback for the LDP since its foundation in 1955.

Nothing less, analysts widely agree, than the end of Japanese LDPdominated politics as we know it and possibly the beginning of a two-party system, in case the LDP is able to recover from the election debacle and become a credible and competitive party in the years ahead. The new Prime Minister Hatoyama in the meantime will take over from his predecessor Taro Aso in mid-September being confronted with the tasks of nothing less than leading Japan out of economic recession, record-high unemployment and deregulating an over-regulated economy in need of economic and structural reforms.

The policy brief will seek to assess whether or whether not a DPJ-led government and Yukio Hatoyama will have what it takes to do just that.

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