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.

TOKYO — Japanese Prime Minister Shigeru Ishiba said Monday he will stay in office to tackle challenges such as rising prices and high U.S. tariffs after a weekend election defeat left his coalition with a minority in both parliamentary chambers and triggered calls for his resignation.