This was within reach, and with the kind of support that Kan and the DPJ (Democratic Party of Japan) were enjoying a few weeks before the election, could have been attained. An Upper House majority would have enabled the DPJ to enact proposed laws without being hamstrung by obligations to small coalition partners.

Now with even fewer seats in the Upper House, Kan has successfully endangered his entire administration. The DPJ’s legislative program will stall in the Diet, captive to the whims of self-serving opposition parties who will seek maximum concessions for minimum numbers of votes in the Diet. ‘Yes’ we ‘Kan’ has suddenly become ‘No’ we ‘Kan’t’.

The DPJ faces a far worse situation than the LDP (Liberal Democratic Party) after the 2007 Upper House election. At least the LDP-led coalition had a two-thirds majority in the Lower House, enabling it to override the Upper House on legislation. The DPJ is not in this enviable position. Moreover, any notion that holding a Lower House election could resolve this ‘twisted Diet’ situation in favour of the DPJ is mistaken. The DPJ would only lose seats in this election, thus putting it in an even weaker Diet position. A Lower House election would be a gift to the opposition. An LDP-led coalition could very well return to government.

The DPJ sought to put Japan on track towards a Westminster-style majoritarian system of parliamentary cabinet government. Kan has surrendered this once-in-a-generation opportunity, delivering a consensus-style democracy, where the cabinet becomes captive to inter-party negotiations on policy. This outcome will stall the development of a two-party system and a culture of united, programmatic major parties, which Japan has lacked hitherto.

Within the DPJ itself, former Secretary-General Ozawa seems to have emerged stronger from this election and Prime Minister Kan weaker, particularly in the balance of power between pro and anti-Ozawa forces within the party. On the consumption tax issue, Ozawa can rightly say ‘I told you so’. Kan reversed Ozawa’s successful electoral strategy of ‘loose fiscal policy based on handouts’ in order to dish out a dose of harsh fiscal reality to Japanese voters. Not surprisingly, Ozawa openly campaigned against Kan’s proposal. While this undermined Kan’s position, Ozawa nevertheless stayed true to the DPJ’s 2007 Upper House manifesto (when Ozawa was DPJ leader), which guaranteed that the government would keep the consumption tax at the existing level, and honoured the DPJ’s 2009 pledge not to raise the consumption tax during its first four years in office.

One of the big questions facing the DPJ government now is: what is Ozawa going to do? He may have disappeared from view, but it is surely a case of reculer pour mieux sauter (drawing back to make a better jump).

In reality, Ozawa’s options are quite limited. A bid for the leadership of the DPJ in September when the presidential election is due is highly unlikely. Ozawa is still fighting his own ‘money politics’ scandal, and he is too tainted with ‘old politics’ and too personally unpopular amongst the Japanese public for a majority of DPJ parliamentary members to entertain the prospect of being led by him once more.

Given Ozawa’s record of using party labels as mere flags of convenience, some might think that he will lead his supporters (which reportedly number anywhere from 120 to 200) out of the DPJ. In practice, this is likely to be a journey into the political wilderness. In 1993 when Ozawa broke with the LDP, he used electoral reform as the issue not only to galvanise his own supporters but also the electorate, a new party and a new coalition government. There is no equivalent at the present time – nothing that will resonate with the electorate, legitimise his break-up of the DPJ and provide a foundation for a new party. There are no parties that would seriously consider joining up with the Ozawa group. Linking up with his old party – the LDP – is hardly a credible option, but it is the only one that might deliver the new grouping a majority in the Lower House.

In the best of all worlds, Ozawa’s goal will be to replace Kan with an Ozawa stooge so that he can rule from behind the scenes, the position in which he feels most comfortable. Ozawa will seek to capitalise on the DPJ’s defeat by undermining Kan amongst the discontented on the backbench, including his own group of supporters. This will make Kan’s life doubly difficult – handling sabotage and dissent within his own ranks as well as a virtually unmanageable Diet. This is what the election has delivered the DPJ and Japan – potential chaos at worst, and on-going political instability at best.

What about the fate of the consumption tax itself? This will become much more difficult to implement because the election was effectively a referendum on this policy and it got a firm thumbs down. Although Kan has reputedly supported a consumption tax rise for some time, any misgivings he might have had about the negative politics it might engender were clearly erased when he was Minister of Finance in the Hatoyama government during the first half of this year. Clearly convinced by the MOF (Ministry of Finance) that it was the right thing to do, and spooked by Greece’s fiscal crisis, he adopted the MOF line on how to deal with fiscal deficits and some of the Budget Bureau’s obsession with balanced budgets.