Hatoyama's victory marks a major turning point for Japan, which is facing its worst economic slowdown since World War II, with unemployment at record highs and deflation intensifying. But concerns ran deep over whether the largely untested government would be able to deliver.

Hatoyama has vowed to cut government waste, rein in the national bureaucracy and restart the economy by putting a freeze on planned tax hikes, removing tolls on highways and focusing policies on consumers, not big business.

He has also pledged to improve Tokyo's often bumpy ties with its Asian neighbors and forge a foreign policy that is more independent from Washington.

"I am excited by the prospect of changing history," Hatoyama said early Wednesday. "The battle starts now."

Parliament convened in a special session to formally select Hatoyama, whose Democratic Party of Japan won a landslide in parliamentary elections last month to take control of the body's lower house, which chooses the prime minister.

Hatoyama's party won 308 of the 480 seats in the lower chamber to oust Prime Minister Taro Aso's Liberal Democratic Party, which is conservative and staunchly pro-U.S.

In Wednesday's parliamentary vote to choose the prime minister, Hatoyama won 327 of the 480 votes in the lower house. He needed a simple majority of 241 votes.

Quickly after his election, Hatoyama named Katsuya Okada as his foreign minister and Hirohisa Fujii as his finance minister. Though Okada has never held a Cabinet post, Fujii was finance minister under a coalition government in 1993-94, the only time in its 55-year history that the Liberal Democrats had previously been ousted from power.

Hatoyama, who has a Ph.D from Stanford University and is the grandson of a conservative prime minister, had a limited pool of seasoned politicians to choose from. His party, created a decade ago, has never held power, and nearly half of the Democrats' members of the lower house will be serving in their first terms in parliament.

But Hatoyama and his party, a mix of defectors from the conservative party and social progressives, face huge tasks that they must deal with quickly.

Although it has recently shown some signs of improvement, Japan's economy remains deeply shaken by the global financial crisis and unemployment is at a record high of 5.7 percent. The rapid aging of its population also threatens to be a drag on public coffers as the number of taxpayers decreases and pension responsibilities swell.

"The economy is in very difficult shape, so we must work hard to improve it," said Mieko Tanaka, one of the Democratic Party's new lawmakers.

Voters expressed hope for change and an upturn for the economy.

"I think it is good that now we are trying something new to change the stagnation," said Osamu Yamamoto, a 49-year-old company employee.

Experts said they had doubts about how effective the new government will be.

"People and employment problems _ these are urgent needs," said Yoshinobu Yamamoto, a professor of international relations at Tokyo's private Aoyama Gakuin University. "The new government needs to decide on its priorities."

Hatoyama will also be tested quickly on the diplomatic front. He has said he wants to attend the General Assembly in the United Nations in New York next week and possibly meet with President Barack Obama.

Hatoyama has said he wants to build a foreign policy that will put Tokyo on a more equal footing with Washington, while keeping the U.S. as the "cornerstone" of Japan's diplomacy. He is also seeking closer ties with Japan's Asian neighbors, particularly China.

Some members of Hatoyama's party have said they want to overhaul the U.S.-Japan security alliance under which 50,000 troops are deployed throughout Japan. That idea has met with strong opposition from Washington, although plans are already under way for 8,000 Marines to be relocated from the southern island of Okinawa to the U.S. territory of Guam.

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AP writers Malcolm J. Foster and Kaori Hitomi contributed to this report.