Hi Cellular. Thank you for including the full story.
The word it is necessary here and could refer to "the prime minister's stance" or "the Chinese response" or something similar. If we replace the pronouns with words, the sentence becomes clearer:
"Though it doesn’t want to be seen as buckling under pressure from Beijing, the Democratic Party of Prime Minister Yoshihiko Noda has little strength with which to face an angry China, unpopular as the Chinese protests are/the detached response is at home and facing a general election the party is likely to lose."
At least, that is my interpretation after skimming the article.
If we omit the word it, then the phrase unpopular at home would refer back to "an angry China," but the problem there is that the structure would fail as the sentence continues (that is, it would be poor if not incorrect to say "unpopular at home and facing a general election the party is likely to lose.").
The sentence could have been written more clearly to begin with in my opinion, but I wanted to focus on the question. :)
Student or Learner