Yen Strengthens Amid Political Upheaval in Japan

The yen gained strength on Monday as Japan's ruling coalition lost its majority in the upper house, signaling a period of potential policy paralysis in the world's fourth-largest economy. This political shift has left investors concerned, with the yen acting as a key indicator of market sentiment.

Despite trading close to recent lows, the yen firmed against the euro and sterling as Prime Minister Shigeru Ishiba's administration fell short of securing a majority in the 248-seat upper chamber. The loss adds pressure on Ishiba, who had already lost control of the more influential lower house.

The ongoing political uncertainty is casting a shadow over Japan's trade negotiations with the U.S., with analysts suggesting Ishiba's potential resignation could trigger foreign investors to offload Japanese assets. This political fragility is expected to influence Japan's monetary policy, as the Bank of Japan may be cautious about tightening conditions in a volatile climate.

(With inputs from agencies.)