Japan's ruling coalition is likely to lose its majority in the upper house, an exit poll for Sunday's election showed, potentially fuelling political instability in the world's fourth largest economy as a tariff deadline with the United States looms.

Japan's yen strengthened on Monday as embattled Prime Minister Shigeru Ishiba vowed to stay on as leader even after his ruling coalition lost its majority in Sunday's upper house elections.

The LDP and Komeito, its coalition partner, are expected to seek co-operation with other parties on a policy-by-policy basis, a strategy that could prove a recipe for instability.