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.

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.

<B>Policy deadlock</B>

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.

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.

TEARS AND SORROW

<B>Japanese gay woman loses bid for parliament seat</B>

■ The first openly gay candidate in Japanese national politics failed to win a seat in upper house elections yesterday, but vowed to continue her fight for minority rights.

Kanako Otsuji, 32, backed by the main opposition Democratic Party, had campaigned in front of rainbow-coloured flags, with loudspeakers declaring to passers-by she was a lesbian.

?I hope to continue until I see the day that we look back and say, ?This is a historic day in the history of sexual minorities,?? Otsuji told supporters. ?We will remember this day because it is the day we grew stronger.? She appeared to be holding back tears at her election headquarters in the heart of Tokyo?s gay community early yesterday morning.

Supporters wept as she walked around thanking them in her cramped headquarters after they had waited until dawn for the final results. ?This is only the beginning,? said one elderly supporter wearing a T-shirt with her campaign slogan ?We?re Okay!? printed on the back.

Otsuji, who served as a local legislator in the western city of Osaka for four years until April, has said her decision to become a politician was inspired by the pain and isolation of the five years it took her to accept that she was a lesbian. She revealed her sexual orientation in 2005, and she made headlines in Japan in June when she married her long-time partner Maki Kimura in a non-legal commitment ceremony attended by friends, family and much of the national Japanese media. She had vowed to promote a more diverse society and seek laws to prohibit discrimination, including against sexual minorities, and had planned to introduce a bill legalising same-sex marriage.