The uncertainty in Japanese politics is driving the yen higher.

After the historic defeat of the ruling coalition in the weekend's Upper House election in Japan, the yen exchange rate rose, laying the groundwork for political uncertainty. Asian stock markets showed mixed trends at the opening. The yen rose 0.7% against the US dollar at one point, but the gains later narrowed as the ruling coalition suffered a historic setback in the Upper House election on Sunday. Nikkei stock futures remained almost unchanged, while the domestic market in Japan was closed for a holiday. In early Asian trading, US stock futures rose slightly by 0.1%. Traders are watching how this political uncertainty will unfold in Japan, as the Prime Minister will now try to gain some support from the opposition to govern to some extent. This is the first time since 1955 that a leader from a long-standing Japanese political party has led the country without a majority in at least one legislative body. "Uncertainty tends to favor the yen, at least initially," said Rodrigo Catril, a currency strategist at National Australia Bank in Sydney. "Overall, the election results are not good news for Japanese assets, and we will consider reducing the yen's strength."