Japan faces political uncertainty after the government was predicted to lose its majority in the upper house following Sunday’s election.
If confirmed, the result complicates fiscal reform efforts.
The opposition Liberal Democrats – who suffered a shock loss in last year’s general election – are crying victory.
Their leader Sadakazu Tanigaki said: “This result came out of the Japanese voters’ severe judgement on the chaotic politics conducted by the Democratic Party of Japan for the last 10 months. It also shows that people supported our effort to regain trust after our defeat last year.”
Prime Minister Naoto Kan of the DPJ has conceded this election but vows to remain in the post he has held for just one month.
“People may have seen the way I mentioned about tax as a little abrupt. I think that a lack of thorough explanation was indeed the big reason for the outcome,” he said.
That comment referred to his proposals for sales tax hikes to help balance the books.
It led to a sharp drop in DPJ ratings although analysts agree Japan needs to make some tough changes to avoid a Greek-style meltdown.
The DPJ-led ruling coalition still has a majority in the lower house of parliament but nevertheless, this defeat could render its position untenable.