Japan's election outcome may put the central bank in a double bind as prospects of big spending could keep inflation elevated while potentially prolonged political paralysis and a global trade war provide compelling reasons to go slow on rate hikes.

Japan’s shaky ruling coalition is likely to lose its majority in the upper house, exit polls showed after Sunday’s election, potentially heralding political turmoil as a tariff deadline with the United States looms.

The loss on Sunday left the Liberal Democrats a minority party in both houses of Parliament, while two new nationalist parties surged.

World markets are mixed after U.S. stock indexes hit new records. Oil prices fell and U.S. futures were little changed.

The LDP’s loss in the upper house is another blow to Prime Minister Shigeru Ishiba, who has been struggling to close a trade deal with the Trump administration.

The U.S. dollar is falling again after rallying for most of July. The U.S. dollar index was down 0.7% to 97.79 after hitting 98.73 on Thursday. Rosenberg Research's David Rosenberg writes that the dollar’s rally faltered around its 50-day moving average last week.

JGB yield rose to the highest since October 2008 at 1.595% last Tuesday after opinion polls increasingly pointed to opposition gains. The 30-year yield shot to an all-time peak of 3.2%, and the 20-year yield leapt to the highest since November 1999 at 2.

The success of new political parties focused on wages, immigration and an unresponsive political elite highlights the frustrations of many working-age people in Japan.