A fringe far-right populist party Sanseito was one of the biggest winners in the weekend's upper house election, attracting many voters with “Japanese First" platform that included calling for tougher restrictions on foreigners and the curtailment of gender equality and diversity policies.

Japan's shaky minority government is poised for another setback in an upper house vote on Sunday, an outcome that could jolt investor confidence in the world's fourth-largest economy and complicate tariff talks with the United States.

The Japanese government said it is responding to "crimes and nuisances committed by some foreigners and inappropriate use of various systems."

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

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.

Japanese were voting Sunday for seats in the smaller of Japan's two parliamentary houses in a key election with Prime Minister Shigeru Ishiba and his ruling coalition facing a possible defeat that could worsen the country's political instability.

Through its careful development of the digital yen, Japan may offer a path to adopt central bank digital currencies without compromising financial stability or civil liberties.

F OR YEARS Japan was a reassuring example for governments. Even as its net public debt peaked at 162% of GDP in 2020, it suffered no budget crisis. Instead it enjoyed rock-bottom interest rates, including borrowing for 30 years at 0.1%. Now, though, Japan is going from comfort to cautionary tale.

The election Sunday is about inflation that has been running between 3.5 percent and 4 percent.