Koike, whose local party scored a resounding victory over Abe's Liberal Democratic Party in the Tokyo metropolitan election in July, said her "Kibo no To" - meaning a party of hope - would field candidates across the country, and hopefully pose a stiff challenge to the ruling camp.
When the ABC asked Tobias Harris, a Japan analyst for Teneo Intelligence and Economy what impact she might have on the election, he said: "Her party looks increasingly capable of gaining at the LDP's [Mr Abe's party's] expense". She said she would remain in her current job while serving as party leader, rather than returning to the national parliament.
The Tokyo governor said in a press conference there is now no reason to call the election before the lower house term expires next year.
Kibo no To plans to fight the election with Koike as the new party's face.
Elected governor of Tokyo a year ago, Koike has already begun pulling disillusioned opposition lawmakers into her powerful orbit amid rumors that she could bring the largest opposition party, the Democratic Party, into the fold.
Abe's LDP-led coalition is unlikely to lose its grip on power, but a weak showing would erode Abe's clout, make policy initiatives harder and jeopardize his hopes of becoming Japan's longest-serving prime minister. Finally, the public supports his firm stance on security as the North Korean missile threat intensifies.
In response to the policy change, the LDP is working on its manifesto highlighting Abe's "human resources development revolution" that aims to realize free education programs for preschool children, as well as for those in universities and other higher education.
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Koike, 65, defied the LDP to run successfully for Tokyo governor past year and her novice local party then crushed the LDP in a metropolitan assembly election in July.
The media-savvy former TV announcer - often floated as a candidate to become Japan's first female prime minister - is looking to repeat that success nationally.
"It would take years for Japan's opposition bloc to present themselves as a real option to voters again" after the disastrous 2009-2012 stint by the DPJ, he said.
Now, she is set to reshape national politics with the formation of a new party and a new attack on the status quo.
She wants to freeze a planned rise in the national sales tax to 10 percent from 8 percent in 2019.
The latter issue has sparked speculation Koike could win the backing from once popular former prime minister Junichiro Koizumi, who advocates an immediate end to atomic energy.
As a point of contention in the upcoming election, Abe has come out with a policy to change the allocation of the increased revenue stemming from a planned hike of the consumption tax rate, which is now 8 percent, to 10 percent in October 2019. That would allow Mr Abe to step up his efforts to push through parliament a modest revision of Japan's post-war pacifist constitution (Article 9 of the constitution restricts Japanese armed forces to a strictly defensive role). "Now we must boldly govern with no political shackles", she declared.