- Associated Press
Sunday, July 11, 2010

TOKYO | Battered by voter backlash over the prospect of higher sales taxes, Japan’s ruling Democratic party suffered a heavy defeat in a parliamentary election Sunday, media exit polls showed, dealing a blow that could hinder the young government’s ability to control soaring debt.

The projected losses were worse than expected and will make it difficult for Prime Minister Naoto Kan’s government to effectively tackle serious problems confronting the world’s second-largest economy, including reining in its bulging deficit, reviving its stagnant economy and supporting a rapidly aging population.

The projected results indicate that the ruling coalition lost its 122-seat majority in parliament’s upper house. The election won’t directly affect the Democrats’ grip on power because they control the more powerful lower house of parliament.

But it does raise the serious prospect of gridlock.

“It’s bad news for Kan and the party, and its really bad news for the nation because it means there isn’t going to be resolute action on all the festering problems facing the government,” said Jeff Kingston, director of Asian studies at Temple University in Japan. “And that’s got global repercussions.”

A fiscal hawk and social progressive, Mr. Kan warned immediately after taking office last month that unless Japan took dramatic steps it could face a Greece-like fiscal crisis — a comparison experts say is exaggerated.

But his proposal to possibly double Japan’s 5 percent sales tax in coming years clearly hurt his party’s chances in the elections, where half the upper house’s 242 seats were up for grabs.

“It’s the taxes. Kan threw that out suddenly, and it really hurt them. It cost them the votes of women, and particularly housewives who look after family finances,” said Tomoaki Iwai, political science professor at Nihon University in Tokyo.

Public broadcaster NHK predicted that the Democratic Party of Japan won between 43 and 48 contested seats in the upper house, down from 54 before the polls. Other TV stations made similar projections. Kan had set a target of keeping those 54 seats.

The Democrats’ tiny coalition partner, the Peoples’ New Party, got no seats, the exit surveys showed.

Official results were not expected until Monday.

Without new coalition partners — or a cooperative relationship with another party or two — the Democrats will likely face difficulties passing bills and pushing their agenda to cut government spending and put more cash in the hands of consumers.

Analysts said that Mr. Kan’s job appeared to be safe for now, but said that his leadership might be challenged at the party’s general meeting in September. Yukio Edano, Democratic party secretary-general, said the party is not considering resignation of any leaders until all the votes are counted.

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