Japan's upper house election on Sunday dealt a big blow to the ruling coalition and sets markets up for possible policy paralysis and a bigger fiscal deficit, much of which is already priced in, analysts said.

Japanese Prime Minister Shigeru Ishiba’s ruling coalition failed Monday to secure a majority in the 248-seat upper house in a crucial parliamentary election, NHK public television said. Ishiba’s Liberal Democratic Party and its junior coalition partner Komeito needed to win 50 seats on top of the 75 seats they already have to retain their majority.

Japanese Prime Minister Shigeru Ishiba, under growing pressure to step down over the historic loss of his ruling party in a weekend election, says he will decide on whether to resign after