Kaoru Yosano, Japan’s former finance minister, said on Sunday that he plans to establish a new political party this week as the opposition Liberal Democratic party struggles to hold together after its electoral defeat last year.

Alongside Mr Yosano will be Takeo Hiranuma, a former minister of economy, trade and industry, and Hiroyuki Sonoda, a former LDP secretary-general.

The defections are a blow to the LDP, which has floundered since last year’s defeat by the Democratic party ended a monopoly over government almost unbroken since the 1950s.

Mr Yosano said the new party would enter candidates for the upper house elections in July in both the proportional representation lists and some constituencies. “If things continue as they are, the DPJ will have a majority in both houses of the Diet. Effective criticism in the upper house is vital for Japan’s democracy,” he said on television.

The LDP has struggled to mount an effective opposition under Sadakazu Tanigaki, its president, despite the funding scandals and policy confusion suffered by the novice DPJ government. Mr Tanigaki said Mr Yosano’s resignation was “regrettable”.

“If the result of the upper house election is really bad, I think there’s a strong possibility that the LDP will fall apart,” Mr Tanigaki said in a Financial Times interview last month.

Kunio Hatoyama, former internal affairs minister, left the LDP last month with the intention of forming a party. Local media reports say he may now join Mr Yosano. Yoichi Masuzoe, another former minister who is one of the LDP’s most popular politicians, has also threatened to leave what he said was now seen as the “Lousy Dumb party”.

One reason for the defections is discontent over Mr Tanigaki’s leadership. “He’s a good man, honest, gentle, brainy. But what he says does not have an impact and does not cause damage,” Mr Yosano has said.

The LDP is also grasping for a policy direction after many of its younger and more reformist politicians lost their seats in the election.

Mr Yosano has consistently advocated raising consumption tax in order to close Japan’s fiscal deficit. His new party is likely to offer conservative fiscal and national security policies, although several of its probable members have different views on issues such as postal privatisation.

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