By Chisa Fujioka
TOKYO, Aug 20 (Reuters) - Japan's main opposition Democratic Party is seen having a good chance of winning an Aug. 30 election, a victory that would end more than five decades of almost unbroken rule by the conservative Liberal Democratic Party (LDP).
A solid win for the opposition Democratic Party in the vote for parliament's powerful lower house would raise the chances of breaking policy deadlock as Japan shakes off a recession.
An inconclusive outcome, however, could spark a tug-of-war in which big parties woo members of small parties and independents to try to form a coalition.
Following are possible outcomes of the election for the 480 lower house seats.
IF OPPOSITION DEMOCRATS WIN BY LANDSLIDE
The opposition Democratic Party may win the election by a landslide, ousting the LDP from power for only the second time in its 54-year history. One newspaper survey showed the Democrats could win 300 of 480 seats in the lower house.
A solid victory for the Democrats would end a deadlock in parliament, where they and their allies have controlled the less powerful upper chamber since 2007.
Financial markets would welcome the prospect of smoother policy-making as Japan tries to revive its economy and deal with new challenges such as those posed by its shrinking, fast-ageing population.
Some analysts worry, however, about the novice Democrats' ability to govern and say the party's ambitious spending plans could inflate already sky-high public debt and push up long-term interest rates.
Even if they win a majority on their own, the Democrats would still need help from two small parties, the leftist Social Democratic Party and the conservative People's New Party, in order to keep control of parliament's upper house and pass bills smoothly.
The three parties issued a common platform ahead of the election, although they left out specifics on diplomatic and security policies, on which the Democrats and Social Democrats differ.
A victorious Democratic government would quickly focus on keeping voter support ahead of an upper house poll in mid-2010, probably by keeping pledges to boost household incomes.
But the new government could be distracted if opponents turned up the heat over a scandal in which Democratic leader Yukio Hatoyama's aide reported donations from people who turned out to be dead.
IF OPPOSITION DEMOCRATS ARE BIGGEST PARTY, FORM COALITION
The Democratic Party could fall short of a majority on its own but still take power by forming a coalition with its two smaller allies.
That would mean it might need to listen more to the Social Democrats and the People's New Party, although neither party is expected to win a large number of seats. A coalition government without a substantial majority would be weaker than one with the Democrats in clear control.
IF OUTCOME IS INCONCLUSIVE
If the Democrats stumble in the final days of campaigning, the margin of victory could be so small as to lead to a tug-of-war as both the LDP and the Democrats try to lure defectors or small parties to join them and form a ruling coalition.
While media polls show the Democrats ahead, the LDP could manage to win back conservative voters with charges that the Democrats are weak on security and unpatriotic, while forecasts for a landslide opposition victory could also prompt some risk-averse voters to opt for the LDP.
A fuzzy outcome would delay the formation of a new government, although parliament must meet to elect a prime minister within 30 days.
Smaller parties formed by disaffected lawmakers from one or both major parties might seek to hold the balance of power in a coalition.
Policy implementation could become difficult, especially since lawmakers might not necessarily vie for power along clear policy lines.
IF RULING BLOC STAYS IN POWER
Opinion polls suggest chances are slim, but the LDP and its junior partner the New Komeito could win a simple majority and stay in power.
Even so, they appear certain to lose their current two-thirds majority in the lower house that has enabled them to enact laws rejected by the opposition-controlled upper chamber.
Without a two-thirds majority for the ruling bloc, a policy stalemate would worsen, at least until the mid-2010 upper house election.
If the policy stalemate dragged on, the idea of a "grand coalition" among ruling and opposition blocs could be revived as a way to break the deadlock, although some analysts say that option is unrealistic under the current electoral system.
One of Aso's predecessors, Yasuo Fukuda, attempted to form such a coalition with then-Democratic Party leader Ichiro Ozawa, only for Ozawa's party to firmly reject the notion. (Editing by Michael Watson)