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TOKYO - Hawkish Japanese Prime Minister Shinzo Abe vowed to stay in his post despite a crushing defeat for his ruling camp in an upper house election, but policy gridlock loomed and Abe's grip on his job was still uncertain.
Voters outraged at a string of government scandals
and gaffes and government bungling of pension records stripped Abe's coalition of its upper house majority in his first big electoral test since taking office 10 months ago.
"The election expressed the frustrations of the people," said Akihiro Kodaira, a 38-year-old civil servant.
"He really needs to accept the results of the election and think about the future. This might include quitting. At the very least, he needs to recognise the opinion of the people and reflect this in his policies," Kodaira said.
The spokesman for Abe's government, however, insisted on Monday that the defeat reflected voter anger at missteps, not a rejection of its basic policies.
Abe has pledged to boost Japan's global security profile, rewrite its pacifist constitution and ensure growth while pursuing economic reforms and cutting the huge public debt.
"We believe we have the public's understanding on our basic direction," Chief Cabinet Secretary Yasuhisa Shiozaki told a news conference.
Abe's bloc will not be ousted from government by the upper house defeat, since it has a huge majority in the more powerful lower chamber, but he was expected to shake up his cabinet in an effort to get a fresh start.
"I think Abe should quit, but he could also get by if he completely reshuffles the cabinet," said Akiko Yamahana, 34, a manufacturing company employee who was waiting out a rainstorm in downtown Tokyo. "One way or another, he needs to make big changes."
The soft-spoken, once-popular Abe still faces pressure to quit from within his own Liberal Democratic Party, which has ruled Japan for most of the past five decades.
"Prime Minister Abe should quit," former defence minister Shigeru Ishiba was quoted as saying by the Yomiuri newspaper.
"If he doesn't, the LDP will be finished."
For now, though, a lack of suitable successors in the LDP could help him survive, analysts said.
The LDP and its partner, New Komeito, won 46 seats compared with 60 for the Democrats.
The ruling coalition had needed 64 to keep its majority in the upper house, where half of the 242 seats were up for grabs.
The LDP alone won only 37 seats, worse than a loss in 1998 that forced Ryutaro Hashimoto to resign as prime minister.
That leaves the ruling bloc with just 103 upper house seats in total, down from 133 before the poll, Kyodo news agency said. Final official results will not be available until late Tuesday.
Without ruling coalition control of the upper chamber, laws will be hard to enact, threatening legislative paralysis.
"Policy uncertainties will worsen as gridlock continues," wrote Robert Feldman, chief economist at Morgan Stanley in Tokyo.
Some analysts noted, however, that Abe had never stressed economic reforms to begin with, in contrast to former Prime Minister Junichiro Koizumi.
"Investors may worry that the LDP's defeat means that the ongoing reform drive will take a back seat, but they won't be greatly disappointed because expectations for Abe as reformer were not high in the first place, compared with his predecessor," said Takahide Kiuchi, chief economist at Nomura Securities.
The election loss came on top of a global shake-out in markets, and the two factors combined to push the Nikkei stock index down to a four-month low, although the yen shrugged off domestic issues.
Critics said Abe was out of touch with voters concerned with bread-and-butter issues such as pensions and health care.
Democratic Party leader Ichiro Ozawa, a pugnacious veteran who bolted from the LDP 14 years ago, had pledged to shrink income gaps and help farmers, long an LDP support group.
Ozawa has vowed to make an upper house win a step towards an early general election, but media warned that his party's public image could suffer if it takes too obstructionist a stance.
No lower house poll need be held until late 2009, and Abe said on Sunday he was not considering calling a snap poll for that chamber, in which his coalition has a big majority.
Ozawa, who suffers heart problems, failed to appear in public on Sunday. Party officials said he was resting after a tough campaign, but his absence cast doubt on his ability to keep leading his often fractious party.
The Democrats are a mix of ex-LDP lawmakers, former socialists and young conservatives, some of whom are seen as ripe for poaching.
Both the LDP and the Democrats are expected to be plagued by internal bickering in months to come, another reason policy debates will go nowhere fast.
"The fact of the matter is that we will have an extended transition period where both parties face an intense leadership battle over the next four to six months," said Jesper Koll, president of investment advisory firm Tantallon Research Japan.
- REUTERS