The DPJ - which was founded in 1998 by LDP defectors, social democrats and former union leaders - has no experience in governing but must cooperate with the powerful bureaucracy, which ruled Japan hand-in-hand with the LDP.

Hatoyama's rise to the highest office in the land came after his DPJ secured a majority of 308 seats in the 480-member House of Representatives, the lower but more powerful chamber of the Diet, in last month's election. It had already won a majority with its coalition partners in the House of Councillors in 2007 elections.

The win pushed the LDP out of office after it had governed for all but 10 months since 1955.

The DPJ's win came from intense public discontent with the LDP and prime minister Taro Aso's government, its handling of the recession, its perceived weakness, a series of scandals that rocked the party and its failure to address domestic concerns, such as Japan's strained pension system and its ageing, shrinking population.

Hatoyama has set his priorities as wresting influence for politicians away from the bureaucracy and revitalizing the world's second-largest economy.

'It is time to make politics which is not controlled by bureaucrats,' Hatoyama said.

He said he plans to do that by increasing household incomes, encouraging spending and cutting LDP outlays he considers wasteful. Those spending cuts, he said, would pay for his new measures and avoid imposing a burden on citizens to pay back the national debt, which, at about 800 trillion yen ($8.5 trillion), exceeds 160 percent of the nation's gross domestic product.

'There are questions about how to finance those policies... I think we can say that securing enough funds is in sight. We will have enough at least for the first year,' he said.

He has also pledged to make cuts in Japan's emissions of greenhouse gases amounting to 25 per cent from 1990's levels by 2020, to be realized by new Environment Minister Sakihito Ozawa.

Hatoyama's cabinet includes members of his coalition partners, the Social Democratic Party and the People's New Party.

The new prime minister said he would take his time to review the country's long-standing security alliance with the US, as demanded by his coalition partners. Demands by the Social Democrats for cuts in the numbers of US troops stationed on the island of Okinawa are set to cool down relations with Washington, observers believe.