Japan’s opposition swept to a historic victory in elections on Sunday, crushing the ruling conservative party that has run the country for most of the post-war era and assuming the daunting task of pulling the economy out of its worst slump since World War II.

A grim-looking Prime Minister Taro Aso conceded defeat just a couple hours after polls had closed, suggesting he would quit as president of the Liberal Democratic Party, which has ruled Japan for all but 11 months since 1955.

“The results are very severe,” Mr. Aso said. “There has been a deep dissatisfaction with our party.”

Unemployment and deflation and an aging, shrinking population have left families fearful of what the future holds.

Fed up with the LDP, voters turned overwhelmingly to the opposition Democratic Party of Japan, which ran a populist-leaning platform with plans for cash handouts to families with children and expanding the social safety net.

“This is a victory for the people,” said Yukio Hatoyama, leader of the Democrats and almost certainly Japan’s next Prime Minister. “We want to build a new government that hears the voices of the nation.”

Mr. Hatoyama and his party — an eclectic mix of former Liberal Democrats, socialists and progressives — face a daunting array of challenges — economic and demographic.

Japan’s economy has been hit hard amid the global recession and falling demand for its exports. The unemployment rate has spiked to a record 5.7 percent and younger workers have watched the promise of lifetime employment fade. Incomes are stagnant and families have cut spending.

The country also faces threats as its population ages, which means more people are on pensions and there is a shrinking pool of taxpayers to support them and other government programmes.

The Democrats’ plan to give families ¥26,000 ($275) a month per child through junior high is meant to ease parenting costs and encourage more women have babies. Japan’s population of 127.6 million peaked in 2006, and is expected to fall below 100 million by the middle of the century.

The Democrats are also proposing toll-free highways, free high schools, income support for farmers, monthly allowances for job seekers in training, a higher minimum wage and tax cuts. The estimated bill comes to ¥16.8 trillion ($179 billion) if fully implemented starting in fiscal year 2013 and critics say that will only further bloat Japan’s already massive public debt.

In foreign relations, the Democrats have said they want Tokyo to be more independent from Washington on diplomatic issues, though they have stressed that the U.S. will remain Japan’s key ally and that they want to keep relations good, while also strengthening ties with their Asian neighbours.

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