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Koizumi calls snap election -

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(generated from captions) Japan is headed to the polls after its parliament rejected plans to privatise the country's post office. The reforms are about much more than delivering the mail. The 25,000 post offices also function as bank branches, providing an almost bottomless fund for government pork barreling. Overhauling that system has been a pet project of the Prime Minister, Junichiro Koizumi, who is now following through on a threatened snap election after government MPs crossed the floor to vote against the bill. From Tokyo, North Asia correspondent Shane McLeod reports.

The vote was always expected to be

close. The upper house was the

close. The upper house was the final hurdle for Junichiro Koizumi's pet

project. CHEERING But it failed

project. CHEERING But it failed to clear and a high number of

clear and a high number of dissident government MPs made it decisive.

Reforming Japan post has been a

cherished goal for Mr Koizumi

throughout his political career. It

controls nearly 3 trillion US

dollars in assets, making it the

world's largest savings bank, yet

world's largest savings bank, yet it spends a lot of that money for

spends a lot of that money for loans for inefficient government spending.

That spending makes it political

popular and it claim Japan's post

and its workers deliver up to 1

million votes for Mr Koizumi's

party. The Prime Minister vowed to

split up the post office and sell

split up the post office and sell it off but it siems it was too much

off but it siems it was too much for some of his MPs to swallow.

TRANSLATION: They overroad the

Opposition and did it forcefully.

They said they would listen to the

opinion, but carried on. They

opinion, but carried on. They pushed the policy unilaterally and

therefore they had no option but to

oppose it. Mr Koizumi is following

through on his threat to bring on a

snap election. Even though it was

upper house MPs that defeated the

bill, it's lower house members that

will face the electorate and the

government's fortunes are flagging.

Finance markets have reacted

cautiously to the tour mile. After

opening the day lower the Tokyo

exchange bounced back. This spells

disaster for Japan, in my opinion,

because the reform story is what

foreign investors had been buying

into. That reform story will be

into. That reform story will be dead with this bill not passing today.

The main result is likely to be a

radical re-shaping of Japan's

political landscape, but it's not

political landscape, but it's not as if the country wasn't warned. When

he became Prime Minister in 2001,

the unconventional Mr Koizumi

the unconventional Mr Koizumi warned he would destroy his party if it

he would destroy his party if it did not embrace reform. For many of his

back benchers they may fear that