Japan’s new ruling party, fresh from last week’s landslide electoral victory, resumed stalled talks with two smaller parties on Tuesday aimed at creating a coalition government.

The Democratic Party of Japan approached the People’s New Party and the Social Democratic Party in hopes of building a government and talks were continuing Thursday, a ruling party official told The Associated Press. The official spoke on condition of anonymity, citing party policy.

While the Democratic Party of Japan won an overwhelming majority in the powerful lower house of parliament in the Aug. 30 election, it needs the cooperation of the two smaller parties because it still lacks a simple majority in the upper house.

An official of the People’s New Party said the three parties aimed to reach an agreement “as early as possible.” He declined to be named because he was not authorized to comment.

The leader of the victorious party, Yukio Hatoyama, who is expected to be selected as Japan’s net prime minister in a party vote on Sept. 16, said he was optimistic about progress in the three—party talks.

“We will reach an agreement. I am always optimistic,” Mr. Hatoyama told TV reporters early Tuesday.

Officials at the Social Democratic Party headquarters declined to answer questions.

The three parties initially aimed to reach a deal last week, but they have not yet agreed on foreign policy issues, such as whether to end Japan’s refuelling operations in the Indian Ocean in support of U.S. troops in Afghanistan.

Mr. Hatoyama said on Monday he would unveil his Cabinet line-up when a ruling coalition has been created.

Speculation on his Cabinet picks has intensified since the party’s resounding victory last week.

Party No. 2 Katsuya Okada is widely expected to get the nod for foreign minister. Media reports have also said the 77-year-old veteran lawmaker Hirohisa Fujii is likely to take the top job at the finance ministry, and Naoto Kan, the party’s acting president, is to head a new agency that will set government priorities and strategies.

Before the election, Mr. Hatoyama said his government would focus foreign policy on Asia, while keeping close ties the U.S., Tokyo’s key ally. Japan’s top-selling daily newspaper, the Yomiuri, said Monday that Mr. Hatoyama would visit China in October for talks with President Hu Jintao.

Kyodo said Mr. Hatoyama is epected to hold talks with visiting Chinese Vice Foreign Minister Wu Dawei on Wednesday.

More In: International | News