The ruling Liberal Democratic Party (LDP) suffered a stunning defeat in the July 2007 upper house elections, creating an unprecedented situation in which the LDP-led coalition lost its majority in the upper house while retaining a two-thirds majority in the lower house. In this new environment of ““divided government”” Japanese style, the LDP and the opposition jockeyed for advantage in foreign and domestic policy debates while preparing for a critical confrontation in the next lower house election.
Prime Minister Koizumi Junichiro stepped down in September 2006 after a five-year term in which he reshaped Japanese politics by undermining his own party's political machine, stretched the constraints on Japan's military role, and promoted a program of ““structural”” economic reform. In his final year in office, he confronted a backlash against his economic reform program and presided over a chill in relations with China and South Korea. Abe Shinzo replaced Koizumi, pledging to repair relations with Japan's neighbors and to promote a pro-growth economic strategy.