Koizumi gets big reform mandate

TOKYO, Monday (Reuters) - A crushing election victory by Japanese Prime Minister Junichiro Koizumi's party was cheered by financial markets on Monday but left questions about his agenda once he achieves his dream of privatising the vast postal system.

Koizumi's Liberal Democratic Party (LDP) took 296 seats in the 480-seat lower house of parliament, the first time it has won a majority in the chamber in 15 years, media reports said.

Coalition partner New Komeito took 31 seats, allowing the ruling bloc to dominate the chamber with majorities in all its committees and override the upper house if need be.

The landslide vindicated the media-savvy Koizumi's gamble to appeal directly to voters to back his plan to privatise Japan Post, a financial services giant that includes a savings bank and insurance business with a combined $3 trillion in assets.

Robert Feldman, chief economist at Morgan Stanley, said in a report on Monday the election result was stunning beyond belief.

"The old adage of 'buy on the rumour and sell on the news' does not apply when the news is so much better than the rumour," he said.

"In light of the results and their implications for accelerated structural reform, a further rise of the equity market would be wholly reasonable." Media immediately urged Koizumi to make his agenda clear.

"Landslide for Koizumi," read the front-page headline on the daily Asahi Shimbun. Another front-page headline in the paper read: "Tell us your plans apart from postal reform."

Koizumi planned to meet with New Komeito leader Takenori Kanzaki later on Monday to reaffirm their parties' alliance.Koizumi, 63, is a silver-haired veteran with a knack for snappy slogans but a patchy record on implementing change.

He called the election after LDP lawmakers helped the opposition defeat bills to privatise Japan Post in the upper house.

His decision to strip LDP rebels of party backing and send what media called "assassin" candidates to take on the "traitors" created a buzz in the normally apathetic electorate, making the poll as much a referendum on Koizumi himself as on his policies.

That "Koizumi theatre" helped boost voter turnout to 67.5 percent, against 60 percent in 2003.

Koizumi has long promised to change the hidebound LDP, which has governed Japan for most of the last 50 years, or destroy it in the attempt. The victory will strengthen his hand over remaining old guard rivals who consider their main job to be distributing benefits to the hinterlands and interest groups.

"He's elected a lot of people who are urban and reform-minded and not part of the old machine," said Gerald Curtis, a political science professor at New York's Columbia University.

"With this huge victory, the centre of gravity in the LDP shifts. He hasn't destroyed the LDP, he's given it a new life."