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Japanese Prime Minister Naoto Kan conceded that he fell short of his targets for the upper house elections on Sunday but added that he wants to stay in his job.
Results compiled on Monday in major newspapers showed Prime Minister Naoto Kan's party fell far short of maintaining a majority in the upper house of parliament.
The ruling Democratic Party of Japan won only 44 seats, and its partner the People's New Party got none, while the opposition won 51 and gained control together with its coalition partners.
Kan acknowledged defeat early in the morning, saying he failed to fully explain his proposal to raise the sales tax from 5 percent to as much as 10 percent.
Naoto Kan said, "I am sorry for this result. I think it was due to my tax hike talk which appeared to have come out too abruptly and the fact that voters did not feel there was enough explanation of the need for it."
With public spending at more than double its GDP, Japan is trying to manage its ballooning debt while also addressing high unemployment and stagnant growth.
Kan has warned the country could face a Greek-style meltdown if it does not get its finances in order, possibly by raising the sales tax.
But the grave losses indicate voters have rejected his solution, and will make it difficult for his government to effectively revive the economy.
Naoto Kan said, "I consider the election result very serious and would like to start afresh to continue leading a responsible government."
The election won't directly affect the Democrats' grip on power because they control the more powerful lower house of parliament.
But it does raise the serious prospect of gridlock.
The upper house election is the first national poll since the DPJ rose to power last September. More than 430 candidates are contesting for the 121 seats in this year's election.
The upper house has 242 seats. A Councilors' term of office is six years. Half of the seats are re-elected every 3 years.