Exit polls suggest a major loss for the Liberal Democratic Party in parliamentary elections, but Prime Minister Shigeru Ishiba is vowing to stay on.

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.

Exit polls suggest Prime Minister Shigeru Ishiba's coalition is likely to lose a majority its majority in the smaller of Japan’s two parliamentary houses in a key election.