* Key index falls 12 points to -70, lowest since March 2009
* Yen's strength drives index down for 5th straight month
* 52 pct say politics has worsened with Democrats in power
By Chikafumi Hodo and Mari Terawaki
TOKYO, Sept 17 (Reuters) - Japanese retail investor sentiment towards domestic stocks fell to its lowest in 18 months in September as the yen's rapid rise heightened concerns about the outlook for Japan's export-led economy, a Reuters poll showed.
Political uncertainty also undermined sentiment, with the survey of retail investors showing more than 50 percent of respondents believe the political situation has worsened in the year since the Democratic Party took power.
The Reuters sentiment index, calculated by subtracting the percentage of investors who say they are bearish from those who are bullish, dropped for the fifth consecutive month, falling 12 points to minus 70 -- the lowest since March 2009.
The sentiment index has tumbled 78 points since April, when it briefly showed a positive reading for the first time since July 2007.
"The yen's strength is having too much of an impact on manufacturers and other exporters," an investor in his 30s said.
The survey of 869 Japanese individual investors was conducted Sept. 6-9, during which time the yen surged to a 15-year high against the dollar.
The benchmark Nikkei average also briefly slipped below 9,000 on the final day of the survey.
"The government needs to show clear steps to boost the economy, yet it appears that this government lacks the ability to come up with any measures," said an investor in his 60s.
Prime Minister Naoto Kan, who kept his job after an unexpectedly decisive victory in a ruling Democratic Party leadership vote this week, is struggling with the strong yen, a fragile recovery and public debt that is twice the size of the $5 trillion economy.
To curb the yen's strength, Japan intervened in foreign exchange markets for the first time in more than six years on Wednesday after the Japanese currency rose to a 15-year high.
The survey showed 52 percent of respondents said the political situation had worsened since the Democrats won a landslide victory last year promising to put more money in the hands of consumers to boost growth and cut wasteful spending.
Only 15 percent said the country's politics had changed for the better, while 33 percent said they had seen no change.
That was worse than six months ago when a similar survey showed 44 percent thought politics had changed for the worse while 19 percent said the had improved.
"This country now needs strong leadership, but the problem is that we lack a politician who has true leadership," another respondent in his 60s said.
The monthly poll, which is conducted anonymously, aims to capture the views of readers of an online magazine aimed at users of the Reuters Japan website http://www.reuters.co.jp (Reporting by Chikafumi Hodo; Editing by Chris Gallagher)