Core Viewpoint - The ruling coalition in Japan is projected to lose its majority in the House of Councillors, which could further weaken Prime Minister Shigeru Ishiba's leadership and disrupt financial markets [2][3]. Group 1: Election Results and Implications - Exit polls indicate that the ruling coalition may secure only 32 to 51 seats out of 125 contested, falling short of the 50 seats needed to maintain a majority in the 248-seat upper house [2]. - Ishiba stated he would continue as Prime Minister, believing the Liberal Democratic Party (LDP) can still remain the largest party in both houses [2]. - If the ruling coalition loses control of the upper house, it would mark the first time since the LDP's establishment in the 1950s that the government holds a minority in both houses [2]. Group 2: Market Reactions and Investor Sentiment - The election outcome may complicate Ishiba's policy agenda and U.S. trade negotiations, potentially leading to his resignation [3]. - Investors are increasingly uncertain about the government's ability to manage fiscal spending, contributing to rising Japanese bond yields, which have reached their highest levels in over 20 years [3]. - The stock and bond markets will be closed on Monday due to a national holiday, with the forex market expected to react first to the election results [3]. Group 3: Public Sentiment and Policy Challenges - Many opposition parties advocating for tax cuts and increased social welfare have resonated with voters, particularly amid rising consumer prices [5]. - The LDP is perceived to be on the defensive regarding key public issues, with most households favoring a reduction in consumption tax to alleviate inflation pressures [5]. - If Ishiba remains in power, the stock market may face downward pressure, while a potential resignation could lead to increased likelihood of tax cuts and a market rebound [5]. Group 4: Legislative Challenges Ahead - Should the ruling coalition lose its majority, Ishiba will need to rely on opposition support for legislation, facing pressure to compromise on tax issues [6]. - Japan must reach an agreement with the U.S. by August 1 to avoid a significant increase in tariffs on exports, which could negatively impact Japan's GDP by 0.9% [6].