TOKYO The Democratic Party of Japan's Upper House election defeat on Sunday leaves it scrambling for coalition allies with the leadership of Prime Minister Naoto Kan increasingly vulnerable, analysts say.

Having gone into the election seeking a stable political base to tackle the nation's massive debt, Kan's 10-month-old government was to lose its Upper House majority in its first electoral test, local media exit polls showed.

The result, less than a year after the DPJ came to power in a sweeping election victory, will be seen as an expression of voter disappointment and could badly undermine Kan's bid to restore confidence in Asia's top economy.

“With the defeat, Prime Minister Kan failed to fulfil his goal to create strong leadership in Japan,” said Shinichi Nishikawa, professor of politics at Meiji University in Tokyo.

Taking office a month ago after the resignation of the deeply unpopular Yukio Hatoyama, Kan pledged to restore the nation's vigour after two decades of economic malaise and tackle a public debt nearing 200 percent of GDP.

Having put the restoration of Japan's tattered finances at the heart of his manifesto, Kan sought a majority to draw a line under a period of damaging revolving-door politics that has seen five new premiers in four years.

However, voters did not give him the clear mandate he wanted to run the country.

Kan's DPJ will hold no more than 113 out of the 242 seats in the House of Councillors — with 122 seats needed for a majority — according to an exit poll by public broadcaster NHK.

Raising the prospect of doubling Japan's five per cent consumption tax as part of efforts to return Japan to fiscal health backfired badly on election day for Kan, analysts say, as he saw his early popularity quickly eroded.

“This election result will make Japan's political set up unable to respond to these economic issues,” said Mikitaka Masuyama, professor of politics at the National Graduate Institute for Policy Studies.

“Although the DPJ has said it will review the whole tax system to restore the nation's finances, they don't have the power to carry it out anymore,” Masuyama said.

By losing its narrow majority in the Upper House, the DPJ now lacks the political momentum needed to push key legislation through the Diet, which could therefore delay any action to rein in Japan's huge debt, analysts say.

Kan now faces a scramble to call for coalition talks with the opposition camp, a process that may force the government to alter its ambitions.

“The government's economic policies will considerably depend on the formation of the coalition,” said Meiji University's Nishikawa.

“But its not going to be easy as no opposition parties are showing willingness to join hands with the DPJ.” Muneyuki Shindo, professor of politics at Chiba University said that the process of coalition building is likely to be protracted. “The DPJ will not be able to find a new coalition partner at least for a year or so,” Shindo said.

“I don't think any opposition party will offer a helping hand.” Pundits point to the Buddhist-backed New Komeito Party and year-old Your Party as the most likely coalition contenders.

Your Party chief Yoshimi Watanabe, however, denied any plans to tie up with the DPJ, charging “If you hear what Mr Kan says, he is flip-flopping all the time... If I were approached, well, I would have to say 'no'.” The election result saw only the conservative Liberal Democratic Party (LDP) and Your Party gain strength in contrast to last year's lower house election which saw the DPJ end more than half a century of conservative rule.

Sunday's defeat is also likely to leave Kan open to internal party leadership challenges, with the result likely to be interpreted as his failure to maintain momentum gained after the resignation of Hatoyama.

The DPJ is scheduled to hold its own leadership election in September.

“Kan faces a rocky road ahead,” said Nishikawa. “Calls for his resignation to take responsibility for the defeat are expected to grow in the DPJ.” Ichiro Ozawa, a DPJ powerbroker who was forced out of his post over money scandals alongside Hatoyama, may revive his influence and play a key role in the September vote, analysts say.—AFP