Voters dealt Japan's government a stinging blow in upper house elections today in a reverse that could thwart its ambitions to curb the country's massive public debt and threatens Prime Minister Naoto Kan's job.
Mr Kan's Democratic Party of Japan (DPJ) are set to win just 47 seats and its tiny partner, the People's New Party, none, losing their combined majority in parliament's upper house, exit polls showed.
The polls show the Democrats far short of Mr Kan's goal of winning 54 seats, a result that leaves him vulnerable to a challenge from inside his own party.
Mr Kan, however, was quoted by public broadcaster NHK as telling a ruling party lawmaker that he would stay.
The Democrats, who have relied on the support of the People's New Party to control the upper house, will almost certainly stay in power by virtue of their majority in parliament's lower house. But they will need to seek new partners to control the upper chamber, complicating policymaking as Japan struggles to engineer growth and rein in public debt nearly twice the size of GDP.
Sagging support for the Democratic Party of Japan (DPJ), which surged to power for the first time last year, rebounded after Mr Kan - Japan's fifth leader in three years - replaced his indecisive predecessor last month.
But ratings slipped again after Mr Kan floated the long taboo topic of raising the sales tax to curb public debt and struggled to persuade voters he had a clear plan to fix Japan's woes.
In an effort to soothe sales tax fears, the prime minister has stressed he would not hike the levy even "one yen" without seeking a mandate in the next lower house poll, which must be held by late 2013.
But he also argued that tough decisions were vital to avoid a Greek-style debt crisis, since Japan's public debt is already close to twice the size of the nearly $5 trillion economy.
"Japan itself must make sure it avoids collapse," Mr Kan told a crowd of voters in western Tokyo as he wrapped up his campaign yesterday. "If state finances collapse, the social security system of ordinary people would suffer most."
The DPJ, which ousted its long-dominant rival last year with pledges to cut waste, prise control of policymaking from bureaucrats and focus spending on households to boost growth, will almost certainly run the government whatever the outcome of today's vote because it controls the powerful lower house.
But the party needs a majority in the upper chamber to avoid policy deadlock and begin taking steps to reduce a public debt that is the worst among advanced countries.
Reuters