The ruling Democratic Party of Japan (DPJ) on Monday suffered a crushing loss in the upper house election held on Sunday, its first national election since last year's change of government.

Quite apart from failing to reach their pre-election target of 54 upper house seats, the beleaguered DPJ actually won fewer seats than their closest rivals the Liberal Democratic Party (LDP), in a defeat that few could have foreseen just a matter of weeks ago.

Having no majority and no obvious path to a coalition, the result leaves the DPJ in a thorny position, with their ability to oversee the nation's fiscal reform, clearly hindered.

Assessing the underlying reasons for the reverse, Prime Minister Naoto Kan admitted that his comments about consumption tax in the build up to the election had been "careless," and the nation' leader now faces major issues of legislative deadlock when it comes to trying to pass new bills.

Despite the prime minister frankly admitting his shortcomings on Monday, he insisted that rather than stepping down, he would work even harder to secure cooperation from other parties and try to avoid a possible political stalemate.

Japan's upper house elections are usually a good indication of a leader's ability to build a stable government and it is not unknown for an embarrassing defeat to bring about a change in leadership. As recently as the last House of Councilors election in 2007, Shinzo Abe quit his post as the head of government after a crushing loss.

Kan's opposite number and LDP leader Sadakazu Tanigaki meanwhile was wholly satisfied by his party's performance in winning 51 seats to the ruling bloc's 44, saying that he believes the LDP has now been "reborn" and that there was "zero chance" of the main opposition party allying with the DPJ. Indeed Tanigaki is predictably calling for an early general election, saying that it was necessary for the DPJ to swiftly dissolve the House of Representatives and seek the voter's opinions.

A desperate search for allies

Despite the heavy defeat, the DPJ will continue to be the largest party in the House of Councilors with 22 more seats than their closest rivals. They also retain control of the more powerful House of Representatives.

The effect of the loss, however, will be to throw an already chaotic Japanese political scene into further disarray, providing little in the way of confidence to industry, commerce and the restoration of the nation's overall fiscal health.

Facing a raft of major problems, including tackling the largest national debt of any industrialized nation and the economic time bomb of a rapidly ageing society, most Japanese had hoped for a more stable political environment after the poll and the beginning of a rebuilding process. In place of that, they will almost certainly see greater levels of tension and confusion both in public life and the National Diet.

Independent political analyst Teruhisa Muramatsu told Xinhua that he sees little option for the DPJ but to make alliances.

"With the opposition calling for a general election, and (DPJ powerbroker Ichiro) Ozawa almost certain to start undermining Kan' s ability to govern in lieu of September's internal vote, (Kan) has got to find some allies. They'll have no power to pass bills smoothly and at the moment Mr. Kan is a sitting duck," Muramatsu said.

One option, much discussed before the election, for the DPJ is to approach Your Party with a coalition proposal. The fledgling party, started by LDP defector Yoshimi Watanabe has been a fierce critic of the proposed consumption tax hike, but emerged as the party with the biggest gain in the election picking up ten seats and a newfound urban support base.

Unfortunately for Kan and the DPJ, Watanabe is none too keen on allaying with a party who he has spent most of the last few weeks on the attack.

"It would make sense to me to reject a marriage proposal from someone who has been all talk and no action," Watanabe said in a TV interview recently.

Some political observers though are unconvinced by Watanabe's reluctance.

"If they are granted some degree of power within the coalition, I can see them agreeing," Dr David Mclellan, professor of Asian Studies at Waseda University and long-term resident of Japan told Xinhua.

"Watanabe seems set on cleaning up behind the scenes and he won 't be able to do that from the sidelines. With the seats they now hold, they will be a powerful ally for the DPJ and can probably use this as a bartering chip."

Hazy future, confused public

The ruling DPJ now faces a tumultuous few months in the build up to their internal leadership vote in September. The destabilizing effect of such events means that just when Kan will need his party behind him in an effort to steer the Japanese economy out of dire straits, rifts are almost certain to deepen. This is something that worries the public too.

After voting in Sugamo, Tokyo, Sunday evening, Shigeru Teramoto, a senior fellow at the Asian Exchange Foundation told Xinhua he feels uneasy about the aftermath of the upper house poll.

"The problem with these elections is that if there isn't a clear winner, there always seems to be this long period of turmoil following them. How are they supposed to solve any of the important issues if they don't know who's in charge?" the retiree complained.

Kan and the DPJ will surely be judged by how they escape this post-election quagmire and, if they can force a coalition that gives them back their majority, albeit with provisos and concessions, on what kind of government they really intend on running.

If Kan's ruling bloc can avoid a general election and avoid too much (Ozawa-linked) infighting in September, they might just keep heads above water. Further reneging on pre-election promises though, or irking a public clearly reluctant to burden the brunt of the government's fiscal blunders over the past two decades, is liable to spell the end of their short if eventful reign.