In the early 1950s, Hamengku Buwono told a foreign observer that “there are dangerous and troubled times ahead” because an alliance was forming between Sukarno and the PKI. The 1950s was a decade of disappointment for Hamengku Buwono, as his PSI allies failed badly in the 1955 elections, left-wing forces — especially the PKI — gathered strength, and Sukarno moved towards more repressive policies, culminating in the inception of Guided Democracy in 1959.

Perhaps one minor consolation had been the performance in the 1955 election of the Gerinda party, the political successor to the PKN of the 1930s, which was the third-strongest party at the polls in the Yogyakarta Special Region. Hamengku Buwono had not endorsed it, but its identification with the kraton presented some kind of confirmation of the continued popular appeal of the Javanese nobility, including Hamengku Buwono himself. Although he paid more attention to the Yogyakarta principality, he remained Jakarta based and seems to have busied himself mainly with his many non-political activities such as his business interests, especially tourism, the scouting movement and sports administration.

In this period, he remained on the political sidelines, but despite the setback in 1952, some were still prepared to predict a national political future for him. As liberal democracy failed and regional revolts erupted, some of those who turned against Sukarno's leadership looked to the more moderate Sultan, whose name was usually coupled with that of Hatta as possible saviours of an increasingly problem-ridden nation. For reasons which have never been entirely clear, Hamengku Buwono was one Javanese leader who generated widespread trust in regions outside Java. His moderate reasonable image was part of the explanation; the residual respect in many areas in Sumatra, Bali and East Indonesia for feudal rulers may be another part. Within Java of course, Hamengku Buwono commanded an enormous amount of public faith and even reverence.

Although in the 1950s Hamengku Buwono said little in public, it was evident that he disapproved of many of Sukarno's policies and actions. In private, he was particularly critical of Sukarno's relationship with the PKI and fearful of the possible consequences. Nevertheless, his attitude to the PKI was pragmatic, and at least locally in Yogyakarta itself he managed to establish a reasonable modus vivendi with them.