Opposition leader Naoto Kan wants to rejuvenate Japan's democracy

The Democratic Party of Japan and the Liberal Party want to present a real challenge to the LDP and its Buddhist-backed partner, the New Komeito, in a national election expected later this year.

The LDP has ruled Japan almost without interruption since 1955.

Analysts questioned the logic of a merger between the left-leaning DPJ and the hawkish smaller party.

But many of Japan's voters are disillusioned with the performance of Prime Minister Junichiro Koizumi and his ruling party, which have failed to reverse the country's economic decline.

Naoto Kan and Ichiro Ozama, leaders of the DPJ and the Liberals, said the amalgamation of their party represented a chance to rejuvenate Japan's political landscape.

"To create a new Japan, it is urgent that we have real changes in government in which the party in power and the prime minister are replaced instead of merely alternating prime ministers from the Liberal Democratic Party," they said in a statement.

The two parties will merge by the end of September, and will co-ordinate their choice of candidates in the next election.

Mr Koizumi could lose his office anyway if he is not re-elected in an LDP presidential race on 20 September, although analysts say he faces no viable contender so far.