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Japan's ruling party casts itself as reasonable, diplomatic

By Tetsushi Kajimoto and Leika Kihara

TOKYO (Reuters) - Japan's ruling Democrats cast themselves on Tuesday as the voice of reason on diplomacy and the economy as they headed for a general election, highlighting a contrast with the hawkish rhetoric and aggressive monetary policy recipes of their rivals.

Prime Minister Yoshihiko Noda and his party vowed to defend national interests, including a chain of rocky East China Sea islets controlled by Japan but also claimed by China and Taiwan, but would do so with diplomacy and "responsible defense."

"There are issues concerning sovereignty, territories and territorial waters, but we must adhere to the peaceful path we have followed since World War Two," Noda told journalists while unveiling the manifesto for the December 16 general election.

"At the same time, we must respond in a cool-headed, practical and strategic manner."

Noda's Democrats trail the opposition Liberal Democratic Party (LDP), whose leader Shinzo Abe, 58, stole the thunder early on with promises to stand up to Beijing and calls for "unlimited" monetary stimulus from the central bank.

Abe, who hopes to return to the prime minister's post he quit in 2007 after just one year on office, has called for reversing a long decline in Japan's defense spending and changes in its pacifist constitution to allow its military to play a more active role.

He also wants the Bank of Japan to agree with the government on an inflation target. Despite criticism that this could infringe on central bank independence, Abe repeated his call on Tuesday.

"The 1 percent 'goal' already announced by the bank won't do. It must instead be a 'target' of 2 percent," Abe told a symposium on Japan's growth strategy.

While commenting on tensions with Beijing that flared up in September after Japan bought the disputed islands from their private owners, Abe stressed the importance of ties with China. But he also said: "China shouldn't attack Japanese companies, boycott our products or do other things that break rules, for the purpose of achieving its political goals."

"China is doing just that and if Japan yields to that, it will just keep on doing so," he said. "We need to tell China that it cannot break the rules."

Noda has warned that Abe's foreign and economic policy ideas could backfire.

Appearing on a TV show on Sunday, Noda said Abe's plan to deploy personnel on the uninhabited islands risked further escalating tensions with Beijing while his thinking on monetary policy was "dangerous", raising questions about central bank independence.

For its part, Noda's party echoed the LDP's vow to battle the deflation that has plagued the world's third-largest economy for nearly two decades hand in hand with the central bank, but stopped short of mentioning any targets or suggesting changes to the central bank law, as their rivals have.

NUCLEAR POWER

The Democrats also reiterated their goal of phasing out nuclear power by the 2030s following last year's Fukushima radiation disaster, another contrast with the LDP.

The Liberal Democrats advocate more debate before deciding on Japan's energy mix and Noda pointed out that his party was more in tune with public opinion.

"The feeling of the people after last year's nuclear disaster is not to rely on nuclear power in the future, to make the future one without nuclear power," he said.

"Based on that view, we decided on the broad policy to mobilize all policy resources to aim at zero nuclear power generation by the 2030s. I want to move forward steadily with that policy without wavering."

But while analysts noted the deliberate tone of the ruling party's message, some were skeptical whether it would be enough to change their fortunes.

"They may be the calm voice of reason but they have proven themselves to be unable to govern effectively," said Jesper Koll, head of equity research at JP Morgan in Tokyo. "In my view the Democrats have done a lot of good things but they were not able to market themselves as the party of leadership."

The LDP leads in opinion polls with 22-25 percent of voters saying they will cast their ballots for the once-dominant party. That is about 10-15 points ahead of the Democrats, who have struggled to close the gap since Noda called for the snap election earlier this month.

The Democrats swept to power in 2009 promising to change how the country is run after more than half a century of nearly non-stop LDP rule characterized by cozy ties between the powerful bureaucracy, big business and ruling party lawmakers. But support for the Democrats has plummeted since then due to policy flip-flops and internal bickering.

(Additional reporting by Linda Sieg and Kaori Kaneko; Writing by Tomasz Janowski; Editing by Raju Gopalakrishnan)

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