Japan PM Fukuda quits over parliament deadlock

By Linda Sieg

TOKYO (Reuters) - Unpopular Japanese Prime Minister Yasuo Fukuda resigned on Monday over a political deadlock, becoming the second leader to quit abruptly in less than a year and threatening a policy vacuum as Japan slips towards a recession.

Fukuda, 72, has been struggling to cope with a divided parliament where opposition parties have the power to delay legislation. His sudden departure has deepened doubts about his conservative party's ability to cling to power or even hold together after ruling Japan for most of the past six decades.

Fukuda has also suffered recently from conflict between his Liberal Democratic Party (LDP) and its junior coalition partner, the New Komeito, which was wary of letting him lead the ruling bloc into an election that must be held in the next year.

"If we are to prioritize 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. "I thought it would be better for someone else to do the job than me."

Taro Aso, an outspoken, right-leaning former foreign minister and LDP secretary-general, is the frontrunner to succeed Fukuda but pressure is likely to mount for an early general election.

A government economic relief plan unveiled on Friday that included a promise of income tax cuts and about $16.5 billion in extra spending this year to ease the pain of rising prices, failed to revive Fukuda's popularity among voters.

"This is two prime ministers in a row ... The political vacuum will be at least two weeks, more like a month. Nothing will get done. It is quite likely that there will be pressure for the LDP to call an election as soon as possible," said Koichi Nakano, a political science professor at Sophia University.

"Certainly, this is not anything that can be condoned. It is unheard of, even by Japan's standards."

Japan has had 10 prime ministers since 1993, when the current head of the main opposition Democratic Party, Ichiro Ozawa, left the LDP and sparked political upheaval that saw the long-ruling party briefly lose its grip on power.

The dollar rose above 108 yen and the euro back up toward 158 yen on the surprise news, which caught traders off guard in a thinner market than usual because of a U.S. holiday.

Analysts said Fukuda's sudden resignation would likely be negative for Japanese shares and a bit of a minus for the yen.

VOTERS GRUMPY

The bespectacled Fukuda, a moderate conservative who favors close ties with Japan's Asian neighbors, took office last September after his predecessor, Shinzo Abe, also suddenly resigned after just a year in office.

Speculation had been simmering that the unpopular Fukuda might be replaced by the LDP ahead of a general election that must be held by September next year but could come sooner.

But the surprise timing of his departure will create the very political vacuum he said he wanted to avoid at a time when Japan's economy is nearing a recession.