FACTBOX-Policies of Japan govt's potential ally Your Party

(For more stories on the Japanese politics click)

July 14 (Reuters) - Japan's ruling Democratic Party, having failed to win a majority in an upper house election, faces political deadlock unless it can find new allies to help enact bills to help curb debt and engineer sustainable growth.

Market players are focusing on a possible tie-up with the opposition Your Party, which advocates small government, market-friendly policies and more aggressive central bank steps to end deflation, although the party has so far rejected the idea of joining the government.

Your Party now has 11 seats in the upper house after Sunday's election, enough to enable it to submit bills to parliament.

But even if it joins the government, the ruling coalition would still fall one seat short of a majority in the chamber. In addition, Your Party's policies are diametrically opposed to those of the DPJ's current ally, the People's New Party.

Your Party leader Yoshimi Watanabe has said it would offer policy cooperation as long as the government or other parties can agree on and support the tiny party's policy agenda.

Following are Your Party's key policy proposals:

* Aim for more than 4 percent annualised economic growth in nominal terms to raise incomes by 50 percent in 10 years. To do so, the party will push various policies in three different stages.

1) In the short term, it will seek to overcome deflation by expanding money supply through more aggressive monetary policy. The law governing the Bank of Japan should be revised so that the government and the central bank share policy goals and set a target for price stability. The BOJ should choose specific tools and the timing of such steps independently.

2) In the medium term, Japan should seek to benefit from growing demand in Asia and aim to obtain a quarter of the estimated $8 trillion demand for infrastructure in the region over the next 10 years.

3) In the long term, it is important to seek a revival in Japan's science and technology capability.

* Push forward deregulation and seek a smaller central government. Give regional communities more power over policy and reduce bureaucrats' control over policy. Cut total personnel costs for central and regional government employees by more than 20 percent. Reduce the number of lower house lawmakers by 180 to 300 and upper house lawmakers by 142 to 100.

* Push forward the privatisation of the country's postal system, including creating a system to better channel some 300 trillion yen ($3,384 billion) held by its banking and insurance services into financial markets and seeking profits by selling shares of Japan Post currently held by the government.

* Aim to bring down outstanding net debt -- gross debt minus government assets -- to less than 50 percent of Japan's gross domestic product (GDP) in five years. Bring the primary budget balance into the black 10 years from now.

* No tax hikes over the next three years, during which Japan should focus on eliminating wasteful spending. After that, consider ways to fund social security costs including reviewing income, sales and inheritance taxes. Cut the corporate tax, which at around 40 percent is the highest among major economies, to 20-29 percent.

* Overhaul the way the state budget is compiled and seek a total of more than 30 trillion yen in additional revenues over three years by tapping into reserves in special budget accounts such as one that holds Japan's foreign reserves, selling government assets and cutting bureaucrats' salaries.

($1=88.66 Yen)

(Reporting by Yoko Nishikawa; Editing by Michael Watson)

(([e-mail]; [phone]; Reuters Messaging; [e-mail])) Keywords: JAPAN POLITICS/YOURPARTY (If you have a query or comment on this story, send an email to [e-mail]) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.