Japan government mauled in election, policy at risk

Japan government mauled in election, policy at risk

Tokyo: Japanese Prime Minister Naoto Kan’s coalition government suffered a major blow in Sunday’s upper house election, exit polls showed, threatening efforts to curb massive public debt and putting his own job at risk.

Kan’s Democratic Party of Japan (DPJ) were set to win just 47 seats and its tiny partner, the People’s New Party (PNP), were set to win none, losing their combined majority in parliament’s upper house, exit polls showed.

The polls show the Democrats far short of Kan’s goal of winning 54 seats, a result that leaves him vulnerable to a challenge from inside his own party.

“The Democrats disappointed me. The situation has clearly worsened in many ways. The mood of the country has become dark after the party took power," said Sachiko Takeda, a 64-year-old housewife, who said she voted for the main opposition Liberal Democratic Party in Tokyo.

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.

The Democrats swept to power last year promising to cut waste and focus spending on consumers to boost growth. Public backing nosedived due to indecisive leadership and while government ratings rose when Kan took over last month, they slipped after he floated a rise in the 5% sales tax to help rein in debt.

A poor election outcome leaves Kan vulnerable to a challenge from party powerbroker Ichiro Ozawa -- a critic of his sales tax hike proposal -- ahead of a September party leadership vote. Few, though, would expect Kan to go without a fight.

Without a coalition majority, the Democrats will need to seek new allies, hampering their push for fiscal reform including a possible sales tax hike.

The DPJ’s current coalition partner opposes raising the 5% sales tax any time soon, as do some potential allies. Other opposition parties agree a hike is inevitable but would probably be reluctant to help out the rival DPJ, which has not yet mapped out any detailed tax reform proposals.

The leaders of two potential partners, Your Party and New Komeito, which partnered with the Liberal Democratic Party until its defeat last year, have rejected the idea of an alliance with the DPJ.

Analysts say they might change their tune later, but would drive hard bargains if the Democrats fare badly.