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.

Its leader is a former supermarket manager who created his political party on YouTube in the depths of the coronavirus pandemic and campaigned on the Trumpian message “Japanese First.”

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