Asian markets mixed as political uncertainty looms in Japan and US futures edge up

Asian shares were mixed on Monday, while US stock futures rose modestly following Wall Street’s third consecutive weekly gain.

Market sentiment remained cautious amid political instability in Japan and anticipation of key earnings reports from major U.S. tech firms later this week.

Markets in Japan were closed for a holiday, a day after the ruling Liberal Democratic Party (LDP) suffered a historic defeat, losing its coalition majority in both houses of parliament for the first time since 1955. The loss follows October’s lower house defeat and deepens the country’s political uncertainty.

Prime Minister Shigeru Ishiba, visibly grim, vowed to remain in office. However, analysts say his weakened government is likely to ramp up spending to win back public support, potentially worsening Japan’s already massive debt load.

“Without a structural reset through snap elections, Japan is likely to face prolonged policy drift throughout 2026,” said Peter Hoflich of BMI, a unit of the Fitch Group, warning of intensified instability, difficulty forming a coalition, and stalled trade negotiations.

Adding to Japan’s economic headwinds, the country faces the threat of sweeping 25% tariffs on its exports to the United States, as trade talks with the Trump administration continue to stall.

Elsewhere in Asia, markets showed modest movement. China’s stocks rose after the central bank held its benchmark lending rates steady, reflecting confidence amid recent signs of economic improvement. The Shanghai Composite gained 0.4% to 3,549.89, and Hong Kong’s Hang Seng added 0.3% to 24,895.20.

South Korea’s Kospi climbed 0.5% to 3,205.71 following a slight improvement in export data for June. Meanwhile, Australia’s S&P/ASX 200 dropped 1.1% to 8,659.50, Taiwan’s Taiex fell 0.3%, and Bangkok’s SET index declined 0.5%. India’s Sensex edged up 0.2%.

Investors are now turning their attention to upcoming U.S. data on home sales, jobless claims, and manufacturing, as well as earnings reports from major companies including Alphabet and Tesla.

On Friday, the S&P 500 ended virtually flat after reaching a record high on Thursday. The Dow Jones Industrial Average dipped 0.3%, while the Nasdaq rose less than 0.1%, also closing at a record.

In corporate news, Norfolk Southern shares jumped 2.5% amid reports of a potential merger with Union Pacific to create the largest North American railroad. However, Union Pacific slipped 1.2% as analysts predicted regulatory pushback.

Netflix dropped 5.1% despite beating profit expectations, weighing on broader market sentiment. Exxon Mobil fell 3.5% after losing a challenge to Chevron’s $53 billion acquisition of Hess, which was cleared following an arbitration ruling. Chevron declined 0.9%.

Treasury yields fell after consumer inflation expectations eased. The University of Michigan’s preliminary survey showed Americans expect inflation to hit 4.4% over the next year, down from 5% last month.

Still, higher import prices may be looming, as President Trump’s administration prepares to impose broader tariffs starting August 1, though some countries are negotiating exemptions.

In commodities, U.S. crude rose 14 cents to $66.19 per barrel, while Brent crude added 10 cents to $69.38.

In currency markets, the U.S. dollar strengthened to 148.50 yen from 147.98 yen, while the euro slipped slightly to $1.1628.