TOKYO, Japan (Reuters) -- 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.
Shinzo Abe's coalition will struggle to enact laws after losing control of the upper house.
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.
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 reshuffle his cabinet.
"I am determined to carry out my promises although the situation is severe," Abe said late on Sunday, after acknowledging that he was responsible for the huge loss.
"We need to restore the people's trust in the country and the government," a weary and drawn-looking Abe told reporters.
Abe still faces pressure to quit, although a lack of suitable successors inside his party could help him survive for now.
"As expected, there are calls for the prime minister's resignation from within his own party. One could not expect that they would accept his staying in power without question," the liberal Asahi newspaper said in an editorial.
"The prime minister should reflect more seriously on the result and step down gracefully."
The LDP and its partner, New Komeito, won 46 seats compared to 60 for the Democrats.
The coalition had needed 64 to keep their majority in the upper house, where half of the 242 seats were up for grabs.
The LDP alone won 37 seats, worse than a loss in 1998 that forced Ryutaro Hashimoto to resign as prime minister.
Without ruling coalition control of the upper chamber, laws will be hard to enact, threatening policy deadlock.
"Reforms must not be allowed to stagnate nor must there be any negative effect on the economy because of political instability," the Nikkei business daily said in an editorial.
Some analysts noted, however, that Abe -- whose top priorities were boosting Japan's security profile, rewriting its pacifist constitution and nurturing patriotism in schools, had never stressed economic reforms to begin with.
"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, with both factors combining to push the Nikkei stock index to a four-month low, although the yen shrugged off domestic issues.
Critics said Abe was out of touch with voters more 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, protect the weak and help farmers -- a group that had long supported the LDP.
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.
"The Democratic Party has called for a dissolution of the lower house ... but it should not oppose everything in parliament or intentionally cause confusion in politics," the Nikkei said. "Such an irresponsible attitude would disappoint the electorate."
Ozawa -- who suffers heart problems -- failed to put in a public appearance on Sunday while others celebrated a stunning turnaround in the party's fortunes.
Party officials said Ozawa had decided to rest to recover from the fatigue of campaigning, but his absence has cast doubts over his ability to keep leading his often fractious party.
A weakened ruling bloc is expected to try to bolster its hand by wooing independents and conservatives in the Democratic Party -- a mixed bag of former LDP lawmakers, ex-socialists and young conservatives, some of whom are seen as ripe for poaching. E-mail to a friend
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