Monday, August 8 2005 22:00 Hrs (IST) - World Time -

Tokyo: Japan's upper house of Parliament today (Aug 8, 2005) voted down a legislation to split up and sell the country's postal services, prompting Prime Minister Junichiro Koizumi to follow through on a threat to call snap elections that could shake the ruling party's grip on power.

Defections from Koizumi's own Liberal Democratic Party (LDP) helped defeat the reform package by a 125-108 vote, dealing a painful setback of the Prime Minister's long-time quest to privatise the postal savings and insurance businesses and pen their massive deposits to private investors.

Koizumi called an emergency Cabinet meeting, and ministers with one dissenting vote decided to dissolve the lower house of Parliament, Foreign Minister Nobutaka Machimura said. The order was later read before the lower house at a specially called session, after which the disbanded lawmakers filed out of the chamber.

"The upper house decided that postal privatisation is not needed. So I would like to ask the general public whether it supports or opposes it. That's why I dissolved Parliament," Koizumi told a group of reporters after the dissolution was announced. "I will do my best to win the elections so that I can continue the reforms."

Koizumi said the ballot will be held Sept 11 and pledged to resign if LDP fails to win combined majority with its coalition partner, the New Komeit Party. Campaigning for the chamber's 480 seats begins Aug 30.

The dissent over the package revealed deep divisions within the LDP, which has held onto power almost uninterruptedly since its founding in 1955. Reform was expected to be a major issue in the campaign, and some speculated that it could split the LDP into separate camps.