While the defeat of DPJ comes as a major surprise, the party has not only failed to meet the pre-election target of 54 upper house seats, but has also secured fewer seats than the Liberal Democratic Party (LDP).
The ruling party just secured 44 seats while their closest rivals Liberal Democratic Party won 51.
Prime Minister Naoto Kan attributed the failure in elections to his earlier comments on consumption tax, which he has admitted were 'careless'.
Due to the the party's strength in the lower house, it will still retain power. However, this defeat will severely hit the ruling party's attempts to tackle debt and revive economy.