Japanese Prime Minister Yoshihiko Noda will dissolve parliament tomorrow, triggering an election that polls show his party will lose three years after ending the Liberal Democratic Party's half-century grip on power.

The ruling Democratic Party of Japan decided the national vote for the lower house will be held Dec. 16, acting party secretary-general Jun Azumi said. The deal to bring forward elections due in August came after LDP leader Shinzo Abe agreed to end an impasse over financing the budget and to support a plan to reduce the number of Diet seats.

Noda's DPJ has seen its public approval slump below 20 percent after three prime ministers in as many years failed to revive growth, end deflation or enact campaign promises on social spending. An LDP win would reinstate Abe, who advocates a tougher policy toward China and greater central bank monetary stimulus, to the premiership he quit in 2007 after 12 months.

"The likely result is a bloodbath for the DPJ," said Jeff Kingston, professor of Japanese politics at Temple University's Tokyocampus. "The economy is definitely the major issue facing Japan and because a lot of those economic and fiscal problems are intractable, that creates a temptation for leaders to dabble in other issues that aren't so difficult."

An election means three of Asia's four largest economies will have new governments in 2013. South Korea's vote for president is Dec. 19, with the winner taking office in February. Xi Jinping today replaced Hu Jintao as head of China's Communist Party and is set to become president in March.

And:

The yen today sank to a six-month low against the dollar after Abe called on the Bank of Japan (8301) to provide unlimited monetary stimulus until deflation is overcome. The yen traded as low as 80.95 per dollar in Tokyo as markets priced in the possibility of more easing by the central bank if the LDP wins.

The next government will get a chance to reshape the central bank's leadership, with Governor Masaaki Shirakawa's term scheduled to end in April and his two deputies' tenures set to end in March.

David Fuller's view Frequent leadership changes in Japan have long been a sign of the country's post-1990 bubble environment, including deflation and the difficult economic period that has followed. Nevertheless, this latest election announcement in Japan may be more significant as the country addresses political and economic tensions with China while also attempting to end its deflationary environment of the last 22 years.

Japan's deflation cannot be ended without a change of personnel at the Bank of Japan - the country's central bank, including the replacement of Governor Masaaki Shirakawa and two of his deputies, which Fullermoney expects as their terms expire in March and April 2013.

Note: This has often been mentioned by Fullermoney and most recently in Comment of the Day on 18th October 2012. See also the last technical review of Japan on 7th November, and especially Eoin's update today which you will find in his section below.