UPDATE 3-Japan govt at risk of setback as voters go to poll

* Election results could put PM’s job at risk

* Ruling party setback could hamper fiscal reform efforts

* Ruling Democrats may need new partners

* Voters unhappy with most parties
(Adds more voter comments)

By Linda Sieg and Chikafumi Hodo

TOKYO, July 11 (BestGrowthStock) – Japanese were voting on Sunday
in an upper house election that could deliver a major blow to
Prime Minister Naoto Kan’s government, stalling efforts to curb
a huge public debt and putting the premier’s job at risk.

Sagging support for the 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 public debt and
struggled to persuade voters he had a clear plan to fix Japan’s
woes.
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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]
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“The Democrats disappointed me. The situation has clearly
worsened in many ways. The mood of the country has become dark
after the party took power,” said Sachiko Takeda, a 64-year-old
housewife, who voted for the main opposition Liberal Democratic
Party in Tokyo.

Others admitted a sales tax rise was inevitable and said
they were willing to give the Democrats a second chance despite
months of indecisive leadership under Kan’s predecessor, Yukio
Hatoyama.

“I’m going to live on a pension, and more money going out
of my wallet is not something I desire,” said Asako Nishikawa,
60, who works for an insurance company and voted for the DPJ.
“But I’ve got grandchildren to think about.”

In an effort to soothe sales tax fears, Kan has stressed he
would not hike the levy even “one yen” without seeking a
mandate in the next lower house poll, which must be held by
late 2013.

But he also argued that tough decisions were vital to avoid
a Greek-style debt crisis, since Japan’s public debt is already
close to twice the size of the nearly $5 trillion economy.

MISSING THE TARGET?

“Japan itself must make sure it avoids collapse,” Kan told
a crowd of voters under a blazing sun in western Tokyo as he
wrapped up his campaign on Saturday. “If state finances
collapse, the social security system of ordinary people would
suffer most.”

The DPJ, which ousted its long-dominant rival last year
with pledges to cut waste, prise 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.

But 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.

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.

A flurry of new, small parties has broadened voters’
options, with an increasing number of voters seen favouring
pro-reform Your Party, which is set up last year by a former
LDP lawmaker.

“I voted for Your Party because I want both the Democratic
Party and Liberal Democratic Party to make more efforts.,” said
Mitsuo Ito, a 64-year-old employee at a food company, resident
of east Tokyo.

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, 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.
(additional reporting by Kiyoshi Takenaka and Rie Ishiguro;
Editing by Alex Richardson)

UPDATE 3-Japan govt at risk of setback as voters go to poll