Japan Heads For Election; Nikkei Rises

Japan will dissolve parliament's lower house Friday for a Dec. 16 election that is expected to return the long-dominant Liberal Democratic Party to power with a conservative former prime minister in charge.

Few expect the election, three years after the Democratic Party of Japan won power for the first time, to resolve a policy stalemate that has plagued the economy as it struggles with an aging population and security challenges due to China's rapid rise, Reuters reports.

Prime Minister Yoshihiko Noda, Japan's sixth prime minister in six years and the third since the DPJ's landslide election win, said Wednesday he would call the election. He had promised three months ago to call an election in exchange for opposition support for his proposal to double the sales tax by 2015 to curb massive public debt.

The Cabinet approved the dissolution on Friday morning, Japanese media said, ahead of the formal announcement by the speaker of the house later in the day.

LDP leader Shinzo Abe, who polls suggest will be the next premier, could further fray ties with China, already chilled by a territorial row over a group of islands.

Japanese stocks rallied for a second day Friday on expectations of further monetary policy easing after the election.

The yen held near a six-and-a-half month low plumbed against the dollar after Abe  called Thursday for the country's central bank to adopt interest rates of zero or below zero to spur lending.

The Nikkei average jumped 1 percent, adding to gains of nearly 2 percent on Thursday.