September 12, 2007 (LPAC)--Japanese Prime Minister Shinzo Abe resigned today after less than a year in office, unable to overcome opposition demands that Japan cease their aid to the U.S.-led war in Afghanistan (and possibly, covertly, in Iraq).

The impact of the political crisis on the unraveling yen-carry trade - whose collapse could detonate a final explosion of the teetering world financial system -- is not yet clear.

Abe's Liberal Democratic Party will choose a new leader, who will become the Prime Minister, as soon as possible, trying to resist pressure to call new elections, which they would likely lose.

The Liberal Democratic Party (LDP), which has ruled post-war Japan almost exclusively, was soundly defeated in upper house elections in July by the opposition Democratic Party, led by Ichiro Ozawa, primarily over repeated scandals within Abe's cabinet. Abe had refused to step down after that defeat, as is customary in Japanese politics.

However, Ozawa and the Democrats have now refused to extend the Anti-Terror Law, under which Japanese ships have been fueling coalition ships in the Indian Ocean which are engaged in the Afghan war. Abe, and his predecessor PM Junichiro Koizumi, have claimed this is not a breach of the Japanese Constitutional restriction against military operations other than self-defense. Abe said this week that he would resign if he could not persuade the Diet to extend the law which expires November 1, but Ozawa would not even meet with him to discuss it.

Admiral Eiji Yoshikawa, chief of staff of the Maritime Self-Defense Force, refuted claims by U.S. Ambassador Thomas Schieffer that Pakistani destroyers would not be able to continue operations if Japan dropped out of the multinational force. According to the daily Asahi Shimbun, Admiral Yoshikawa told a news conference a few hours before Abe's resignation that the United States is fully capable of replacing the Japanese role.

Further, the Democratic Party announced this morning, before the resignation, that they will use their enhanced investigative powers in the upper house to investigate reports that the Japanese ships in the Indian Ocean have also been used to refuel American warships engaged in Iraq. The report originated from a posting on the website of the U.S. Navy's Fifth Fleet, saying that Japan had contributed 86 million gallons of fuel to Operation Iraqi Freedom. The posting was subsequently removed.