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Last Updated: Monday, 8 August 2005, 13:24 GMT 14:24 UK
Japan faces new political landscape
By William Horsley
BBC News, Tokyo

Postman in Tokyo - generic image
Japan's Post Office also manages trillions of dollars of savings
In communist states the party maintains political control.

In Japan, the Post Office has been a key piece of machinery keeping the Liberal Democratic Party in power, with one short break, for the past 50 years.

The network of 25,000 post offices across the land, employing 250,000 staff, is a lifeline for many rural communities.

But it is also a nearly bottomless pit of funds, liberally used by local political barons to cement their power base, by spending lavishly on ambitious local projects like roads, bridges and dams.

Some party colleagues blame Mr Koizumi's uncompromising stance for splitting the party

Prime Minister Junichiro Koizumi came to power four years ago determined to end a system he sees as endemically corrupt, and an obstacle to his plans to modernise the Japanese economy and trim the role of the state.

As proof of his determination, Mr Koizumi astonished even some of his allies by saying he would push through his Post Office privatisation plan even if it meant political suicide.

With deliberate calculation, he labelled Monday's Upper House vote on the reforms as a confidence vote in his government, and lost it.

Tight election

So his reforms are stalled, at least for now. And some of his party colleagues blame Mr Koizumi's uncompromising stance for splitting the party.

About 20 LDP members in the Upper House voted against the reforms. In the Lower House, some 50 of the party's 249 members defied their leader. All these rebels are to be banished from the party. Many are expected to form a new, anti-reform conservative party to contest the election.

Mr Koizumi has a chance again to win support from Japan's affluent, urban, middle-class voters

One possible outcome of the crisis is that the LDP will face a long political eclipse. A rival conservative group, the Democratic Party of Japan - made up mainly of defectors from the LDP from an earlier split - now looks well-placed to make gains at the LDP's expense. The Democrats held 176 seats in the Lower House, compared to the ruling coalition's 278.

The political row over Mr Koizumi's Post Office privatisation plans have failed to ignite much interest among Japanese voters. Economists are divided about the merits of his detailed reform ideas.

But there is a broad consensus that he is right to try to break up unaccountable monopolies like the Post Office.

Some commentators compare the task of undoing the baleful grip of LDP patronage, and Japan's entrenched bureaucracy, with Europe's need to wean itself off an old-fashioned system of farm subsidies.

Koizumi should have gone about securing votes in a more diplomatic manner
Maiko, Japan

What's more, Koizumi appears to have held most of his party together behind him.

He is quoted as saying he wants to "smash" the old LDP and forge ahead with a new, cleaner and more modern version of the party.

On that platform he has a chance again to win support from Japan's affluent, urban, middle-class voters who now make up the majority - though under LDP party rules he only has one year left as party leader.

But Mr Koizumi is a wily political operator with popular appeal. He won the last election in 2003 for the LDP. It would be rash to rule out his chances of doing so again.

If he fails, some Japanese commentators fear it would spell "the end of reforms" in a country that badly needs them.

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