House Speaker Tamisuke Watanuki read out the dissolution order at a plenary session of the Lower House on Friday.
The general election will be the first since Koizumi swept to power in 2001 on a wave of grassroots support for his reform agenda to rein in public spending, privatise postal services and money-haemorrhaging public firms, and fix Japan's ailing banks.
Encouraged by signs that Japan's stagnant economy is at last recovering, the LDP is counting on traditional backers such as farmers, small business owners and Koizumi's popularity, to
help it keep a majority in the 480-seat Lower House.
But a recent surge in the value of the yen to three-year highs against the dollar has clouded the outlook for the export-led recovery.
The ruling bloc holds 285 seats, with the LDP alone having 244 against 137 for the newly merged opposition Democratic Party, which hopes a recent merger with a smaller rival and a detailed platform of its own reform ideas will improve its prospects.
The strong Yen and the Iraq issue
could be Koizumi's achilles heal
"I think it will be the first real election in 10 years where the administration will be at stake," Democratic Party leader Naoto Kan told reporters, referring to 1993, when the LDP lost power for the only time in its nearly 50-year history.
"I think there are few people who think the current situation in Japan is good the way it is now. I want the people of Japan to feel courage, that their one vote can change Japan," he added.
Koizumi's support ratings leapt by as much as 20 percentage points to more than 60% of voters after he shook up top party and cabinet posts last month, putting several youthful, media-friendly politicians in the limelight.
Those ratings could get a further boost from media coverage of his meeting with his close ally US President George Bush in Tokyo next Friday.
Analysts say however that that strategy might just backfire if Koizumi seems to be bowing too deeply to US demands for hefty financial aid and significant participation by Japanese troops in rebuilding Iraq, an issue that will be high on the two leaders' agenda.
If the LDP fails to maintain its majority, or barely keeps it, Koizumi's old guard rivals could agitate to replace him or at least step up their opposition to his reforms.
Some LDP members said Koizumi's popularity might not be enough to prevent the party from losing its majority, although they expect it to stay in power with the aid of its two partners, the Buddhist-backed New Komeito and the New Conservative Party.