Japan's government needs to weaken the yen and undertake an expansionary fiscal policy to beat deflation, the leader of Japan's Your Party, a small opposition party that made strides in an upper house election, said on Monday.

Monetary easing by the Bank of Japan is also needed to overcome deflation, the party's head, Yoshimi Watanabe, told a news conference.

Your Party won 10 seats in the upper house in the July 11 election and could cooperate on a policy-by-policy basis with the ruling Democratic Party, which suffered a drubbing and lost the majority it held with a small coalition partner.

The Democrats still control the more powerful lower house. But they will need help from other parties to push bills through the upper house as Prime Minister Naoto Kan seeks to revive the world's second-biggest economy and reduce massive public debt. (Reporting by Yoshifumi Takemoto)

Japan Inflation