Japanese PM Abe tells his coalition he will quit

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TOKYO, Sep 12 (Reuters) Embattled Japanese Prime Minister Shinzo Abe, struggling after a bashing at the polls and suffering low support rates, has told executives of his ruling coalition he intends to resign, a ruling party lawmaker said today.

''The steering committee chairman told me that the prime minister intends to resign,'' Liberal Democratic Party (LDP) lawmaker Hakuo Yanagisawa told Reuters.

The hawkish 52-year-old Abe, who took office just one year ago promising to boost Japan's global security profile and pursue economic reforms and growth, was set to give a news conference at 2 pm (1030IST), his office said.

The shock reports caused the yen and Japanese stocks to slip, on concerns about political uncertainty.

On Sunday, Abe had indicated that he would step down if he failed to extend a Japanese naval mission supporting US-led operations in Afghanistan.

Opposition parties, which won control of parliament's upper house in the July poll and can delay the enabling legislation, had been preparing to grill him on the topic in parliament this afternoon.

''The timing is astonishing. It's a huge surprise. He said he would risk his job in passing the antiterrorism law, so I don't know why he is resigning before making the effort,'' said Koichi Haji, chief economist at NLI Research Institute.

The LDP and its junior partner suffered a drubbing in the July election, and his support ratings have floundered amid a row over pensions and a series of financial scandals involving cabinet ministers.

LDP Secretary-General Taro Aso, a close Abe ally who shares most of his hawkish views on security policy, is generally seen as frontrunner to succeed as LDP president and hence, prime minister.

Financial market players have been worried about the possibility that the stalemate over the naval mission and Abe's other woes would either prompt him to resign or spark a snap election for the powerful lower house, threatening political instability and a policy vacuum.

ALREADY WEAKENED Abe had already been weakened by scandals and gaffes by ministers that contributed to the election disaster and had been expected to provide fodder for opposition grilling in parliament in the coming weeks.

Abe has put most of his energy into diplomacy -- improving ties with China and South Korea -- and pushing a conservative agenda that includes rewriting the pacifist constitution, so some analysts said his resignation might not affect economic policies all that much.

''The impact on economic policy may be limited, since there is no imminent issue that needs to be tackled in parliament,'' Haji said.

''But the political uncertainty will surely sour market sentiment, so I expect stock prices to get hit. People may take a wait-and-see approach for now, but it would be hard to buy Japanese shares in the long term.'' Others, though, noted his successor would face a number of tough policy headaches.

''Abe probably wanted to start afresh as he thought that his ardent wish to change the constitution would not be realised even if he stayed on now. It is apparent that his administration is a lame duck,'' said Takeshi Minami, chief economist at Norinchukin Research Institute.

''As for economic policy, his successor will have to take over the difficult task of balancing fiscal consolidation and efforts to revive regional economies, when changing the tax system is an option that is very difficult to take.'' REUTERS CS VC1032

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