Japanese political veteran Ichiro Ozawa and dozens of other members of parliament who quit the ruling party over a tax hike plan will launch a new party on Wednesday in a bid to challenge the government, possibly heralding an era of political shakeup.

The exit of Ozawa, a 70-year-old whose political clout is waning after four decades of maneuvering, removes a key obstacle to Prime Minister Yoshihiko Noda's efforts to control his Democratic Party of Japan (DPJ) and forge coherent policies.

But Noda, who depends on support from opposition parties to pass bills in a split parliament, remains vulnerable to an early election if further defections shrink the DPJ's already slim majority in parliament.

The next lower house election must be held by September 2013 and the possible proliferation of smaller parties will also make coalition politics a necessity.

The defection of Ozawa and his followers cuts the DPJ's members in the lower house to 250, allowing the party to keep its majority by just 11 seats.

Ozawa, a major powerbroker who was a driving force behind the DPJ's rise to power in the 2009 general election, named the new party "Kokumin no Seikatsu ga Daiichi," which translates as People's Lives First.

The DPJ had promised to put more emphasis on the lives of regular people and wrestle national politics from the control of powerful bureaucrats.

"I am determined to take action in order to help revoke the bill for the consumption tax hike," Ozawa told the inaugural meeting of his new party, comprised of 49 lawmakers from both upper and lower houses of parliament.

"The bill has been forced through the lower house following a scenario written by bureaucrats and reneging on promises to the people," he added.

Ozawa's party base - 37 lawmakers from the lower house of parliament and a dozen others from the upper chamber - quit the DPJ after voting against a bill to double Japan's consumption tax to 10 percent by 2015.

The bill, which already cleared Japan's lower house, was also expected to pass the upper chamber and become law.

Noda had insisted the hike was crucial to chopping Japan's massive public debt, the biggest debt pile among industrialized nations.

The DPJ retains a lower-house majority, but Ozawa's new party comes ahead of an election expected next year with the ruling party set to suffer at the polls over its tax hike and reactor restarts.

AFP - Reuters