Prime Minister Taro Aso's LDP party has suffered a historic defeat in Sunday's parliamentary elections.

The votes are still being counted, but exit polls show that Japan has clearly shifted to the left.

The centre-left Democratic Party of Japan has won 300 out of a total of 480 seats in parliament.

The LDP has gone from more than 300 to 100 seats, and Prime Minster Taro Aso has announced he will resign as party leader.

TDPJ party leader Yukio Hatoyama will succeed Mr Aso as the new prime minister mid-September.

Mr Hatoyama says he will form a coalition government with several smaller parties.

The conservative LDP, which has governed almost without interruption since 1955, has been hit with a series of political scandals.

And there has been widespread criticism of its handling of the economic crisis in Japan, where unemployment is at record height.

Yukio Hatoyama has promised voters he will make Japan less subservient to the United States and improve ties with Japan's Asian neighbours.

At the opening of trading on Monday, the Nikkei index went up by two percent at the news of the DPJ victory.