Prime minister Yoshihiko Noda has dissolved the lower house of Japan's parliament, paving the way for a general election likely to end his Democratic Party of Japan's three-year hold on power.
Mr Noda followed through on an earlier pledge to call elections after the opposition Liberal Democratic Party (LDP) agreed to back several key pieces of legislation, including a deficit financing bill and electoral reforms.
The Cabinet was expected to quickly announce elections for December 16.
The election is likely to result in a weak coalition government divided over how to fix the country's myriad problems.
Although the LDP, which led Japan for most of the post- Second World War era, may win the most seats in the 480-seat lower house, polls show it will fall far short of a majority.
Mr Noda's Democratic Party of Japan (DPJ) has grown unpopular thanks to its handling of the Fukushima nuclear crisis and especially its recent doubling of the sales tax. The elections will probably end its three-year hold on power.
A divided government could hinder decision-making as Japan wrestles with a two-decade economic slump, clean-up from last year's nuclear disaster, growing national debt and a rapidly ageing population - not to mention a festering territorial dispute with China that is hurting business ties with its biggest trading partner. Japan must also decide whether it will follow through with plans to phase out nuclear power by 2040 - a move that many in the LDP oppose.
"It's unlikely that the election will result in a clear mandate for anybody," said Koichi Nakano, a political science professor at Sophia University. "So in that sense, there's still going to be a lot of muddling through."
Still, many see the prospect of change as a positive: Japan's Nikkei 225 stock index jumped 2.2% to close at 9,024.16.