The projected major defeat for the ruling coalition in Sunday's Upper House election is expected to make it difficult for the government to raise the consumption tax in the near future or to promote farm trade liberalization.
Since taking office last September, Prime Minister Shinzo Abe has said the government will start full discussions on tax reform this fall.
Shortly before the official start of campaigning for the Upper House poll, Abe hinted at the possibility of raising the consumption tax from the current 5 percent. But he later downplayed the remarks and did not express a clear position during the campaign.
The Democratic Party of Japan and other opposition parties oppose raising the tax.
"It will be difficult to promote debate on a consumption tax hike," a senior official at a government economic agency said in reference to the landslide victory projected for the DPJ, the largest opposition force, on Sunday.
A senior Finance Ministry official said the government needs to "carefully watch the political situation following the election and its impact on the stock market."
Abe's administration earlier this year launched free-trade talks with Australia — Japan's first FTA talks with a major exporter of farm products.
A bumpy road is expected to lie ahead for the negotiations, given that Japanese farmers strongly oppose wider foreign access to rice and other agricultural markets.
The government is promoting support measures mainly targeting large-scale farmers to make the agricultural sector more resilient in the face of trade liberalization.
But the DPJ opposes support measures that focus on large-scale farmers.
A senior farm ministry official said he is concerned about the election's possible adverse effects on agricultural reform.