Japan PM to stay after poll defeat

By George Nishiyama

TOKYO (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 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 on Sunday in his first big electoral test since taking office 10 months ago.

"The election expressed the frustrations of the people. He really needs to accept the results of the election and think about the future. This might include quitting," said Akihiro Kodaira, a 38-year-old civil servant.

Abe reiterated on Monday his intention to stay on.

"We must take these results very seriously and reflecting on what we must reflect on ... I want to fulfill my responsibility to proceed with reform to build the nation and promote economic growth that the people can feel," Abe 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 said he would reshuffle his cabinet in an effort to win back voter trust.

Abe has also pledged to boost Japan's global security profile and rewrite its pacifist constitution, but his conservative agenda may have to take a back seat.

"Constitutional reform is important, but we need to clearly show that we care about issues close to home, like life in regions and social disparities," Akihiro Ota, head of the junior ruling party New Komeito, told reporters.

FRACTIOUS OPPOSITION

Critics had said Abe was out of touch with voters concerned with bread-and-butter issues such as pensions and health care.

Ichiro Ozawa, head of the main oppositions Democratic Party and a pugnacious veteran who bolted from the ruling Liberal Democratic Party (LDP) 14 years ago, had pledged in the campaign to shrink income gaps and help farmers, long LDP supporters.

Ozawa has vowed to make the 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.

Ozawa, who suffers heart problems, has not appeared in public since Sunday's victory. 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.

No lower house poll need be held until late 2009, and Abe said he was not considering calling a snap poll anytime soon.