TOKYO: The centre-left government of Japan`s new Prime Minister Naoto Kan lost its narrow majority in parliament`s upper house in elections Sunday, spelling the threat of legislative paralysis.

The government was not immediately threatened, because it holds a majority in the more powerful lower chamber, but the result makes it more difficult to pass laws and will force it to seek new coalition partners.

The election defeat -- the first test at the ballot box since Kan`s party swept to power under a previous leader in a landslide poll last summer -- complicates Kan`s ambitious reform plans for the world`s number two economy.

"Sincerely accepting the election results, I feel like I`m standing at the starting line again," Kan said in a post-midnight press conference.

"This election result showed we have ended up failing to achieve our initial goal by far. I feel very sorry for those who have supported us."

When Kan took office a month ago as Japan`s fifth prime minister in four years, he pledged to restore the nation`s vigour after two decades of economic malaise and to whittle down a huge public debt mountain.

The one-time leftist activist also promised to strengthen the social safety net for the rapidly ageing society and raised the prospect of tax hikes to pay for it all -- a gamble that backfired badly on election day.

If Kan, the 63-year-old former finance minister and self-declared "son of a salaryman", or man of the people, was looking for a strong mandate from Japan`s more than 100 million eligible voters, he was left disappointed.

His Democratic Party of Japan (DPJ) will hold 106 out of the 242 seats in the House of Councillors, according to an exit poll by major local media, including public broadcaster NHK.

Its coalition partners secured only four seats in the chamber as a result of the election, meaning the ruling camp will have 110 seats in total and have trouble pushing laws through the two-chamber parliament.

Instead, Kan`s government will have to engage in coalition talks to seek the support of smaller parties, with pundits pointing at the Buddhist-backed New Komeito Party and year-old Your Party as the most likely contenders.

Your Party chief Yoshimi Watanabe, however, denied any plans to tie up with the DPJ, saying: "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, which saw only the conservative Liberal Democratic Party (LDP) and Your Party gain strength, was disappointing for the DPJ, which less than a year ago took power in an electoral earthquake that ended more than half a century of conservative rule.

When the DPJ assumed government last September under then-leader Yukio Hatoyama, it promised to end the murky backroom politics of the business-friendly LDP and the powerful state bureaucracy.

Instead, Hatoyama resigned after less than nine months in office -- brought down by his indecisive leadership, a dispute over an unpopular US airbase, and funding scandals that reminded voters of Japan`s political business as usual.

When Kan, the former deputy premier, took over in early June, he was initially greeted by approval ratings above 60 percent -- but the honeymoon period ended within weeks, after Kan brought up the subject of raising taxes.

Newspapers praised Kan for having the courage to speak of the option of doubling the five-percent sales tax to bring down the huge public deficit, which is nearing 200 percent of gross domestic product.

But when Kan`s poll rating immediately dived, he quickly softened his proposal, stressing that any possible tax hike was years away -- a move that in turn left him open to charges of backtracking.

Shinichi Nishikawa, politics professor at Meiji University, said that "the tax hike debate is the cause of the defeat".

"Prime Minister Kan faces a rocky road ahead. He does not have to quit, but calls for his resignation to take responsibility for the defeat are expected to grow in the DPJ. The election result proved it`s difficult for Japan to create a strong political leadership."

BDST: 0948 HRS, 12 July 2010