Japan's Democratic party has formed a coalition with two smaller allies that will give it control of both the upper and lower houses of the Diet, observers say.

The accord was sealed after the Social Democratic party accepted some compromise wording concerning the redeployment of U.S. forces on Okinawa, Financial Times reported Wednesday.

Incoming Japanese Prime Minister Yukio Hatoyama, leader of the Democratic Party of Japn, is expected to give Cabinet positions to the leaders of the coalition allies, the Social Democratic Party and the conservative People's New Party, when he takes office Sept. 16.

The Social Democrats won seven seats in the lower house in last month's election while the People's New Party took three seats.

Local media has quoted a Social Democratic executive as saying the new coalition government would raise the issue of renegotiating the terms of the redeployment of U.S. Marines on Okinawa.

The United States has said it has no intention of renegotiating.