The lower house of the Japanese parliament has been dissolved, to make way for an early election.
Friday's action comes ahead of a ballot scheduled for December 16 that is likely to bring about a change in the nation's government.
Yoshihido Noda, the nation's sixth prime minister in as many years, is behind in the polls.
"This is an election to decide on the nation's direction - to go forward or to go backward," Noda told an evening press conference.
Noda and his centre-left Democratic Party are both expected to be stripped of their power after Tokyo continues to struggle in propping up its economy following the March 2011 earthquake, tsunami and Fukushima nuclear crisis.
Lawmakers punched the air, shouting "Banzai" three times - Japan's equivalent of "three cheers" - before erupting into applause in a live broadcast of the dissolution. A later cabinet meeting endorsed December 16 as election day.
"We are determined to do our best to have the Democratic Party of Japan at the helm of the nation ... and fight it out to move politics forward," Noda said.
"After a month of debate, I want the people to come to the right verdict."
Noda has been under pressure to call elections for months and offered dissolution of the main decision-making chamber in a parliamentary debate earlier this week.
Speaking to Al Jazeera from Tokyo, Michael Penn, a reporter for the Shengetsu news agency, gave two possible reasons for Noda's action:
"There may have been lawmakers planning to defect from the ruling party and he felt he was about to lose his majority in the parliament anyway ... [or the party was looking to] shed the members that they didn't want and make a comeback sometime next year."
Noda did, however, manage along the way to secure a number of concessions from his opponents - among them, an agreement on a deficit-financing bill allowing the government to issue bonds to cover its debts this financial year, without which Japan would have effectively run out of money at the end of this month.
That bill passed the opposition-controlled upper house on Friday morning.
Having had almost two-thirds of the 480 lower house seats when they came to power in 2009, the DJP party had lost its majority by Friday morning.
Commentators say no single party will have the numbers to govern alone after the election, with an untidy coalition of the centre-right Liberal Democratic Party (LDP) and smaller fringe parties seen as a likely outcome.
Penn said the chances of Noda's party winning "are almost zero".
Shintaro Ishihara, former governor of Tokyo, who established his Party of the Sun this week, met on Friday with Toru Hashimoto, the Osaka mayor who recently-launched the Japan Restoration Party.
Kyodo News cited sources close to Hashimoto's party saying the pair would meet again to work out a deal on Saturday as they look to narrow their policy differences and forge a "third pole" between the two largest parties.
"The focus will be on how many seats the third force, led by Hashimoto, will gain. They may have a balance of power, depending upon election results," said Koji Nakakita, professor of politics at Hitotsubashi University in Tokyo.
He added that the LDP may seek to shore up its alliance with New Komeito, a centrist Buddhist grouping.
Shinzo Abe, LDP leader, who is positioned to return to the job of prime minister, a post he held from 2006-2007, told a press conference the party's three years out of office had been ones of reflection.
"We will build a strong economy that will become a stronger foundation of social programmes, that will result in vibrant regional economies and that will bring a strong recovery" to the tsunami-hit northeast, he said.
Financial markets have begun preparing for an LDP-led government, which is expected to be more business-friendly, with the yen softening markedly after Abe called for "unlimited easing" by the Bank of Japan.
Penn said a likely victory of the LDP is seen as "almost by default". The party had ruled the nation for over 50 years previously.