The defeat of Japan’s ruling Liberal Democratic Party (LDP) in upper house elections on July 29 is a serious political blow to Prime Minister Shinzo Abe, who took office just 10 months ago. The result revealed widespread hostility toward Abe’s agenda of reviving Japanese militarism, backing the US “war on terror” and implementing regressive economic and social policies.

In one of its worst defeats in the past five decades, the LDP lost control of the upper house of the Diet or parliament. Of the 121 seats contested—half the upper house—the LDP won just 37, while its coalition partner New Komeito won 9. The ruling coalition now holds just 105 seats in the 242-seat house, down from 133.

Abe immediately came under pressure to resign. The Asahi Shimbun urged Abe to step down and reported that 56 percent of exit poll respondents wanted him to do so. Two other major national newspapers—the Nikkei and Mainichi—called on Abe to dissolve the lower house and hold a general election. Several reports noted that Ryutaro Hashimoto had resigned as prime minister in 1998 after winning 44 seats in an upper house poll.

Abe immediately ruled out any resignation or early election, promising to reshuffle his cabinet instead. “I can’t run away at this point. The situation will become very severe, but even in this kind of situation, we can’t afford a political vacuum,” he said.

The first casualty was agriculture minister Norihiko Akagi, who apologised for a damaging scandal over the misuse of funds and stepped down on Wednesday. The allegations swirling around Akagi were among a number of scandals besetting the government. Akagi only took office in June. His predecessor committed suicide after being accused of bribery and corruption.

A cabinet reshuffle will not end the growing hostility to the government. When Abe took over last September from Junichiro Koizumi, his popularity stood at more than 70 percent. Now his approval rating is below 30 percent and shows no signs of improving.

Abe’s program is essentially the same as that of Koizumi. Abe’s slogan of building a “beautiful nation” is a threadbare disguise for the revival of Japanese militarism, including the scrapping of the so-called pacifist clause in the constitution, the reintroduction of patriotic education into schools and boosting the military. While attempting to mend bridges with China, Abe stands squarely behind the US-Japan alliance and the Bush administration’s occupations of Afghanistan and Iraq.

At the same time, Abe’s government has sought to continue the economic restructuring and privatisation policies that have created a deepening social divide in Japan. Unemployment, pension problems and lack of services preoccupied many voters. In the words of Jiro Yamaguchi, a political professor at Hokkaido University in one of Japan’s most socially deprived regions: “The Japanese public had absolutely no interest in the themes [the “beautiful nation”] being promoted by Abe.”

Some of the LDP candidates distanced themselves from Abe. Kohei Tamura, a third generation LDP politician campaigning for the upper house in the economically depressed district of Kochi told reporters: “I don’t get what ‘a beautiful country’ means. Here in Kochi, we’ve been reduced to worrying about our next meal. So, when he [Abe] comes to support us with this pie in the sky ‘Japan a beautiful country’... I feel he’s making fools of us.”

Economic growth and increased corporate profits have not led to better living standards. On the contrary, according to a recent survey, 42 percent of Japanese said they were worse off than a year ago, while 52 percent said they are no better off. In the first half of 2007, real wages were 0.7 percent below the same period last year and 2.7 percent below the level of 2001. Over the past 15 years, low-wage, part-time and casual workers have increased in numbers to one-third of the workforce.

The social issues were highlighted by a scandal that erupted in May when the health ministry’s Social Insurance Agency revealed it had lost 50 million pension records and failed to input an additional 14 million into the computer system over the previous decade. It had also underpaid pension benefits.

Pensions are a major issue among Japan’s aging population. The Koizumi government created a public furor in 2004 when it was revealed that senior politicians, including Koizumi, had not been paying their pension contributions, even as the government was proposing changes to the pension scheme to increase contributions and decrease benefits.

According to a Kyodo News survey, 63 percent of respondents said the pension scandal was the most important issue in the election, followed by education reform, constitutional revision, redressing the disparity between rich and poor and finally, the political scandals.

Koizumi was able to impose his right-wing agenda in part because he made a populist appeal to the widespread alienation. He cultivated an anti-establishment image, appealing to young people by ditching the traditional dark suit and displaying an interest in rock music.

In 2005, he expelled LDP members in the upper house who had voted against his key postal privatisation legislation and called a snap election on the issue. By limiting the campaign to a single issue of postal “reform” and presenting himself as a rebel against the LDP establishment, he was able to brush aside widespread opposition to Japan’s military involvement in the US occupation of Iraq and win a convincing victory.

Abe can resist demands for his resignation partly because the LDP still has an overwhelming lower house majority. Despite being Japan’s youngest prime minister, however, Abe is in no position to adopt Koizumi’s persona. Coming from a long line of LDP bluebloods, he is a conventional right-wing politician to the core. He brought the postal rebels back into the party to boost the LDP’s chances.

More fundamentally, working people have borne the brunt of the LDP’s regressive policies and are increasingly sceptical of political spin and image. Even if Koizumi had continued as prime minister, he may well have suffered a significant decline in support.

Opposition vote

The opposition Democratic Party of Japan (DPJ) capitalised on the anti-government sentiment by posturing as a defender of living standards. The party won 60 seats, mainly at the expense of the LDP, and now holds a 137-seat majority in the upper house. The Japanese Communist Party won 3 seats, the Social Democratic Party 2 seats, the People’s New Party 1 seat and independents won 7 seats.

In the past, the DPJ has sought to outflank the LDP by demanding more radical market reforms. Current leader Ichiro Ozawa, who split from the LDP in the 1990s, is a fervent advocate of Japanese remilitarisation. In this election, however, the DPJ made a populist appeal to working people. Ozawa told a May Day rally this year that his party would “stand in the shoes of workers, residents and taxpayers”.

The DPJ campaign slogan was: “The people’s lives should be the No.1 matter.” The party promised a series of measures, including a monthly allowance of 26,000 yen for children until they graduate from middle school, paying farmers the difference between production costs and market prices to keep them on the land, and a guarantee to use all consumption tax revenues to pay a portion of pensions.

The DPJ is now manoeuvring in preparation for lower house elections, likely to be held later this year or early next year. Nevertheless, last weekend’s result was not so much a vote for the DPJ, but against Abe and the LDP. Significantly, the LDP lost heavily in rural districts, previously considered its unassailable stronghold. The number of single-seat rural districts held by the LDP fell from 23 to 6. Rural electorates that once were lavished with government subsidies are increasingly areas of poverty and unemployment.

The Bush administration immediately expressed concern. US ambassador to Japan, Thomas Schieffer declared: “It would be unfortunate if [the election result] spilled over into issues that hopefully Japan looks on in a non-partisan way”. Washington’s particular fear is that Tokyo will back away from its support for the US “war on terror” and its occupations of Afghanistan and Iraq.

One sign of the deep-rooted hostility in Japan to any revival of militarism was the public outrage that erupted over comments in June by former defense minister Fumio Kyuma justifying the US dropping of atomic bombs on Hiroshima and Nagasaki in 1945. Kyuma was forced to resign three days later.