Japanese Prime Minister Shinzo Abe abruptly announced his resignation on Wednesday after a year in power dogged by scandals, an election rout and a crisis over Japan's support for U.S.-led operations in Afghanistan.

The hawkish Abe, who took office promising to boost Japan's global security profile, had seen his clout dwindle after a drubbing in upper house elections in July, but the announcement came as a bolt out of the blue.

"I determined today that I should resign," a weary-looking Abe told a news conference.

Senior officials said health was a factor in the decision but Abe said a new prime minister would be better placed to resolve a deadlock over extending a controversial mission to support U.S. military efforts in Afghanistan.

Abe, at 52 Japan's youngest prime minister since the end of World War Two, reshuffled his cabinet only last month to rekindle public approval, but a poll this week showed support was stuck below 30 percent.

"There are many things I reflect on," the soft-spoken grandson of another prime minister said. "It is my responsibility that my old and new cabinet could not secure the public's trust."

Japanese stocks fell and the yen dipped briefly on concerns about political uncertainty.

Chief Cabinet Minister Kaoru Yosano told reporters that Abe's health was one reason for the departure.

"He was doing his best but I think he decided to resign because he felt that if he went on, he would not be able to fulfill his responsibilities," Yosano said, but he did not specify what the health issue was.

SUCCESSOR RACE

Abe will stay on in a caretaker role until a successor is chosen from his Liberal Democratic Party (LDP) in a party election that media said would probably be on September 19.

LDP Secretary-General Taro Aso, a close Abe ally who shares most of his hawkish views on security policy, is seen as frontrunner to become the new prime minister.

Other names floated include former finance minister Sadakazu Tanigaki and former chief cabinet secretary Yasuo Fukuda.

The LDP and its junior partner have a huge majority in parliament's lower house, which picks the prime minister.

Abe had indicated that he would step down if he failed to extend a Japanese naval mission supporting U.S.-led operations in Afghanistan, but the timing of his move was unexpected.

"It is the worst possible timing," LDP lawmaker Gen Nakatani told Fuji Television.

"Parliament has started and it's now lost its leading act. There will be confusion, loss and trouble."

Some local LDP chapters, worried that the party could not win the next general election with Abe in charge, had pushed him to step down. No election need be held until 2009, but a parliamentary deadlock could spark one sooner, pundits say.

Opposition parties, which won control of parliament's upper house in the July poll and can delay bills, including legislation to continue the navy's Afghan support mission in the Indian Ocean, had planned to grill Abe in parliament on Wednesday.

TIMING "ASTONISHING"

Both the LDP's coalition partner and Aso questioned the timing and said it was important to avoid a political vacuum.

Financial market players were also caught off guard.

"The timing is astonishing. It's a huge surprise. He said he would risk his job in passing the anti-terrorism law, so I don't know why he is resigning before making the effort," said Koichi Haji, chief economist at NLI Research Institute.

Abe said he had decided to quit because opposition Democratic Party leader Ichiro Ozawa had declined to hold a one-on-one meeting about the Afghan support mission.

Ozawa denied he had rejected a meeting. He said he was ready to meet Abe's successor but added his party's stance the issue would not change.

Abe's support ratings have floundered amid government bungling and theft of public pension premiums and a series of scandals and gaffes that cost him five cabinet ministers, including one who committed suicide.

"At first I had high hopes for him, but I was disappointed because ultimately he had no leadership," said Kumiko Eno, 60, a Tokyo housewife.

Abe has put much of his energy into education reform and diplomacy, moving swiftly after taking office to improve relations with relations with China and South Korea.

"Bilateral ties have achieved conspicuous improvement and development in recent years. Prime Minister Abe has played a positive and constructive role in it," Chinese foreign ministry spokeswoman Jiang Yu said in a statement.

Some analysts said Abe's resignation might not affect economic policies much but would sour stock market sentiment.

Others noted his successor faced tough policy headaches including cutting Japan's huge public debt, tax reform and reviving weak regional economies.

(Additional reporting by Tokyo bureau)

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