Friday, July 24, 1998 Published at 11:59 GMT 12:59 UK
Obuchi wins leadership election
Special editions of newspapers announced the results
He will almost certainly become prime minister when parliament meets later this month.
The BBC correspondent in Tokyo says there will be immediate pressure on Mr Obuchi to restore confidence in the ailing Japanese economy, in particular by reforming the banking sector which is riddled with bad loans.
But critics have accused Mr Obuchi of being too bland to make any significant impact.
It was Japan's economic crisis that led to the resignation of the outgoing Prime Minister, Ryutaro Hashimoto, earlier this month.
Mr Kajiyama, the main challenger, came in with 102 votes, and Mr Koizumi with only 84.
Prime Minister Hashimoto resigned to take responsibility for the party's disastrous showing in elections earlier this month for the upper house of Parliament. Voters deserted the party for its poor management of the economy.
Mr Obuchi is now set to be elected prime minister in a vote by parliament on 30 July, because the LDP commands a comfortable majority in the lower house.
He had been seen as the front-runner of the election, with broad party support. Voting took only 37 minutes.
The BBC correspondent says that although the result was not unexpected, the size of the majority was a surprise.
Analysts say that, while Mr Obuchi is known to be good at forging political deals, he is not the ideal choice for the markets.
The yen tumbled to 141.70 against the dollar just after Mr Obuchi's victory was announced, a significant drop from its position just 15 minutes before the result.
"The yen was sold in disappointment that Obuchi won," a Bank of America dealer said.