TOKYO (MNI) – The ruling coalition led by the Democratic Party of
Japan appears to have lost a majority in the House of Councillors after
Sunday’s parliamentary elections, public broadcaster NHK projected based
on its exit polls.

But NHK also reported that Prime Minister Naoto Kan, who heads the
DPJ, told his aides that he will stay in power regardless of the results
of the elections in order to continue pursuing sustained economic growth
and more stable social security.

Opinion polls by news media leading up to Sunday’s elections had
indicated that the DPJ-led coalition were unlikely to maintain its
majority in the upper house and would have to ask small parties to join
the coalition.

Of the 242 seats in the House of Councillors, 121 were up for
grabs, including 73 in prefectural districts and 48 proportional
representation seats.

The ruling coalition led by the DPJ, which still holds a majority
in the more powerful lower house, is estimated to have gained only 44 to
51 seats in the upper house in addition to its 66 uncontested seats,
according to NHK’s projections.

The estimated total — in a range of 110 to 117 — would fall short
of the majority of 122 seats in the upper house.

In the House of Representatives, the DPJ holds 310 seats, easily
clearing a majority of the 480-seat chamber without support of other
parties, but in the House of Councillors, the DPJ and its small ally
held only 122 seats before Sunday’s elections, a tight majority of the
242-seat chamber.

The ruling coalition’s majority in the House of Representatives
allows it to push its national budget through parliament without upper
house consent. However, all other bills have to be approved by the upper
chamber to become law.

In the last upper house election in 2007, the DPJ, which was the
main opposition party at the time, scored a landslide win and secured a
majority in the chamber together with other parties in the opposition
camp.

After a sweeping victory in the last lower house elections in
August 2009, the DPJ took power away from the then ruling coalition led
by the Liberal Democratic Party, creating a non-LDP government for the
first time in 15 years. The LDP had ruled the country since 1955 except
for a brief eight-month period through early April 1994.

But the DPJ has had its own crises since last September when its
then leader Yukio Hatoyama took office as prime minister.

In June Hatoyama resigned after less than nine months in power. He
took the blame for the plunging public approval of the administration
and the departure of one of the two small ruling coalition partners. He
sacked the head of the Social Democratic Party as a cabinet minister
over policy differences regarding a controversial U.S. air base.

The DPJ has failed to keep its election campaign promise of
relocating the Futenma U.S. Air Base somewhere outside the prefecture or
even outside the country.

The party has also suffered political funding scandals involving
both Hatoyama and Ichiro Ozawa, the conservative politician who was
number two at the DPJ and had been the driving force behind major
election wins for the party.

After taking over from Hatoyama, Kan said he would push for a
policy of achieving a combination of strong economic growth, fiscal
consolidation and social security.

During the upper house election campaigns, Kan called for
parliamentary debate on the need to raise the 5% sales tax in order to
secure a stable funding source for additional public spending on job
creation, which he said should help Japan move out of stubborn
deflation.

Kan mentioned an idea of hiking the sales tax rate to 10% in the
medium term, which appeared to have come as an abrupt proposal to some
voters, prompting the public approval rating for the Kan administration
to slump.

Japan’s consumption (sales) tax took effect on April 1, 1989, with
an initial 3% rate on goods and services. In April 1997, then prime
minister Ryutaro Hashimoto raised it to 5%, following the decision to do
so by the previous government.

msato@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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