The yen is falling as election results cloud the prospects for rate hikes

Japan’s governing coalition lost its majority in the House of Commons in Sunday’s general election, with the opposition making significant gains.

The financial markets in Tokyo reacted sharply to the results on Monday. The yen weakened against the dollar, while stocks tumbled.

Investors sold the Japanese currency, believing that political uncertainty could delay rate hikes.

The yen briefly fell to the upper 153 level. Analysts say the unclear outlook for the Japanese government could make it harder for the Bank of Japan to tighten policy.

But the yen’s decline encouraged investors to pick up shares, especially in export-related companies. The Japanese benchmark Nikkei 225 ended Monday 1.8 percent higher at 38,605. It briefly achieved more than 800 points.

Analysts said shares also rose on growing expectations of Japanese government spending to boost the economy following the rise of opposition parties in the election.