UPDATE 1-Japan PM Fukuda resigns over deadlock

TOKYO, Sept 1 (Reuters) - Unpopular Japanese Prime Minister Yasuo Fukuda said on Monday that he had decided to resign in an effort to break a political deadlock.

Fukuda has been struggling to cope with a divided parliament where the opposition parties control the upper house and can delay legislation.

"If we are to prioritise the people's livelihoods, there cannot be a political vacuum from political bargaining, or a lapse in policies. We need a new team to carry out policies," Fukuda said.

Speculation has been simmering that the unpopular prime minister might be replaced ahead of a general election that must be held by September 2009.

Fukuda's resignation does not automatically mean an election. His party, the Liberal Democratic Party, must pick a new leader and win the confidence of parliament's lower house if it wants to carry on leading Japan's coalition government. (Reporting by Linda Sieg and Isabel Reynolds; Editing by Rodney Joyce)