Japan Ruling Coalition Loses Upper House Majority Amid Yen Strength

The Japanese yen strengthened following the ruling Liberal Democratic Party's (LDP) loss of majority in the upper house election, reflecting investor anxiety over political uncertainty and potential policy paralysis. Prime Minister Shigeru Ishiba's LDP secured only 47 of the 50 seats needed, increasing pressure on his leadership after previously losing control of the lower house. Despite Ishiba's intention to remain in office, the weakened position of the ruling coalition raises concerns about Japan's fiscal prospects and market stability ahead of an August 1 deadline for tariff negotiations with U.S. President Donald Trump. Analysts warn that Ishiba's possible resignation could trigger foreign investor sell-offs in Japanese equities and the yen, intensifying market volatility. The yen's gains come alongside a selloff in Japanese government bonds and a cautious market environment influenced by Trump's escalating tariff policies globally. While a coalition with the Democratic Party for the People could restore some stability, the political impasse continues to weigh heavily on market sentiment.