UPDATE 1-Japan PM’s party at risk of setback in Sunday vote

* Election results could put PM’s job at risk

* Ruling party setback could hamper fiscal reform efforts

* Ruling Democrats may need new partners
(Updates after polls open)

By Linda Sieg and Yoko Nishikawa

TOKYO, July 11 (BestGrowthStock) – Japan’s ruling coalition could
lose control of parliament’s upper house in an election on
Sunday that could stall efforts to curb a huge public debt and
put Prime Minister Naoto Kan’s job at risk.

Sagging support for the leading Democratic Party of Japan
(DPJ), which surged to power for the first time last year,
rebounded after Kan — Japan’s fifth leader in three years —
replaced his indecisive predecessor last month.

But ratings slipped again after Kan floated the long taboo
topic of raising the sales tax to curb a public debt already
close to twice the size of the nearly $5 trillion economy. He
struggled to persuade voters he had a clear plan to fix Japan’s
economic woes.

Kan has since stressed he would not hike the sales tax “one
yen” without seeking a mandate in the next lower house poll,
which must be held by late 2013, but stressed that Japan must
make tough decisions to avoid a Greek-style debt crisis.

“Ten to 30 years from now, will people look back and think,
the prime minister said something catchy but things went wrong,
or … the prime minister said what was bitter and harsh, but
that was the start of rebuilding our economy and social security
system?” Kan said on Saturday as he wound up his campaign.

“I am determined to do something that will not go down in
history with shame.”

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

See graphics:

PM support falls over sales tax: http://r.reuters.com/myv63g

DPJ lead narrows over rival: http://link.reuters.com/jev83j

Japan’s massive public debt: http://r.reuters.com/sez92m

Upper house seats before poll:
http://link.reuters.com/tuv85m

More stories on the Japanese politics: [ID:nPOLJP]
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

MISSING THE TARGET?

The DPJ, which ousted its long-dominant rival last year with
pledges to cut waste, pry control of policymaking from
bureaucrats and focus spending on households to boost growth,
will almost certainly run the government whatever the outcome of
Sunday’s vote because it controls the powerful lower house.

The party needs a majority in the upper chamber to avoid
policy deadlock and begin taking steps to reduce a public debt
that is the worst among advanced countries.

With polls open, the outcome was uncertain.

Media surveys last week showed the DPJ would likely win
around 50 or even fewer of the 121 seats up for grabs in the
242-member chamber — well short of Kan’s target of keeping all
54 seats the Democrats have up for re-election.

That would deprive the DPJ and its tiny coalition partner,
the pro-spending People’s New Party, of a majority in the upper
house. The Democrats would be forced to seek new allies,
complicating the government’s ability to forge ahead with the
fiscal reform that Kan has put at the heart of his campaign.

It would also leave Kan vulnerable to a challenge from party
powerbroker Ichiro Ozawa — a critic of his sales tax proposal
— ahead of a September party leadership vote. Few, though,
would expect Kan to go without a fight.

Many voters have been having trouble finding a party to
their taste — although a flurry of new, small parties has
broadened their options — with surveys showing a hefty chunk
were undecided, making precise predictions murky.

The DPJ’s current coalition partner opposes raising the 5
percent 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.
[ID:nTOE661014]

The leaders of two potential partners, the small, pro-reform
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.

UPDATE 1-Japan PM’s party at risk of setback in Sunday vote