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Prime Minister Junichiro Koizumi's ruling coalition retained a majority but suffered significant losses in general elections Sunday, signaling a public rebuke over his failure to reignite Japan's economy through broad reforms.

Japanese Prime Minister Junichiro Koizumi grimaces as he speaks to television reporters at Liberal Democratic Party headquarters in Tokyo November 9, 2003. In a blow to reforminist Koizumi, Japan's ruling coalition was headed for a slimmer majority in a general election on Sunday as the main opposition party made surprisingly hefty gains. [Reuters]

In a surprisingly weak election for the charismatic Koizumi, 61, his ruling Liberal Democratic Party (LDP) lost its single-party majority in the lower house, but managed to hold on to power with the aid of two, smaller coalition partners.

The opposition Democratic Party, meanwhile, made strong gains by riding a wave of popular frustration over the slow pace of Koizumi's crusade to slash wasteful government spending, revamp debt-laden banks and put the world's second largest economy back on track after a 13-year slump.

The Democratic Party's better-than-expected performance -- gaining at least 40 seats for a total of 177 in the 480-seat lower house after its merger with the smaller Liberal Party in September -- solidified its position as a new and formidable rival for the LDP, which has largely dominated Japanese politics since the end of World War II. The rise of a progressive opposition party stocked with young Turks appeared to signal a landmark shift in Japanese politics, away from a one-party goliath and closer toward a U.S.-style, two-party system.

"The tsunami of a two-party confrontation has come to Japan," said Hiroshi Kumagai, a Koizumi ally and head of the New Conservative Party, one of three ruling coalition parties. Kumagai lost his own bid for re-election Sunday.

The Liberal Democratic Party went into the election with a 247 seat majority in the lower house. In one of its most toughest electoral losses in years, it lost at least 12 seats -- as well as its single party majority. But Koizumi's three-party alliance will still have a minimum of 273 seats, or 13 less than before.

The vote marked the first general election since Koizumi rode to power in 2001 on a promise to re-invent the stodgy LDP. He initially won celebrity status here for his charisma and flair, but his popularity has flip-flopped in recent months. Last month, he took a big gamble by dissolving the lower house and calling early elections for Sunday in a bid to strengthen his administration and, he said, win a stronger popular mandate to carry out reforms.

But analysts said that today's results indicated a hefty dose of public skepticism about Koizumi's ability to enact real change from within the LDP. Many of its senior leaders are seen as opposed to key reforms such as the privatization of the national post office and highway administrations as well as being resistant to cuts on massive pork barrel spending, which critics say is the main reason Japan has gone from being the globe's economic dynamo to the most heavily indebted industrialized nation.

"Koizumi can continue to govern, but because the LDP could not win as many votes as expected, they will have to come up with a new strategy," said Yasunori Sone, professor of political science at Tokyo-based Keio University. "The LDP now has a huge uphill battle. Japanese voters are finally serious about wanting change. Koizumi is going to have to do more than talk about reform, he will actually have to do it."

Analysts said the LDP's weaker than expected performance may in fact complicate Koizumi's ongoing struggle to push aside elements in his party who are opposed to reforms. Koizumi has had some success, especially during his skillful re-election to a new term as president of the LDP two months ago . But the blow to the LDP on Sunday was seen as weakening Koizumi's own standing, leaving him more vulnerable to rivals.

Koizumi, however, vowed to continue. "My 'responsibility' will not be an issue as long as the coalition wins a majority," Koizumi said in a TV interview on Sunday.

In the weeks and months ahead, Koizumi may find it harder to follow through with some of his most controversial policies. Those include the dispatching of Japan's Self-Defense Forces to Iraq. The Democratic Party has already come out against the decision, as has the New Komeito, Koizumi's largest coalition party after the LDP.

Polls have shown that most Japanese are also leery about involving this pacifist nation in the on-going reconstruction effort in Iraq. Koizumi's staunch support of the U.S. effort, and his personal friendship with President Bush, appeared to cost him a measure of voter support.

"I am dead against sending the Self Defense Forces to Iraq, and I came to express that," said Yoshiko Arai, a 66-year-old Tokyo housewife, after casting her vote this morning. "Koizumi is supporting the U.S. regardless of the meaning of U.S. actions, to an extent that it is embarrassing."

But the big issue working against Koizumi is the same one thatproved tougher to overcome than the Persian Gulf War for former President Bush -- the domestic economy.

Although the Japanese economy has showed recent signs of life including a slightly reduced jobless rate and a jump in the stock market, most Japanese simply do not seem to believe they have reached a turning point. And Koizumi is being blamed.

"I was hopeful of Koizumi at the beginning, but our country gets worse and worse," said Mitsuyo Hattori, a 52-year old restaurant manager. "He asks the people of this country to shoulder the burden, but nothing has gotten better. Now, we need change."

Special correspondents Sachiko Sakamaki and Akiko Yamamoto contributed to this report.

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