Japan's election outcome may put the central bank in a double bind as prospects of big spending could keep inflation elevated while potentially prolonged political paralysis and a global trade war provide compelling reasons to go slow on rate hikes.

Asian shares were mixed on Tuesday after U.S. stock indexes inched to more records at the start of a week of profit updates from big U.S. companies. Japan’s benchmark surged and then fell back as it reopened from a holiday Monday following the ruling coalition's loss of its upper house majority in Sunday's election.

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The U.S. dollar is falling again after rallying for most of July. The U.S. dollar index was down 0.7% to 97.79 after hitting 98.73 on Thursday. Rosenberg Research's David Rosenberg writes that the dollar’s rally faltered around its 50-day moving average last week.

The downside risk to the USD/JPY exchange rate has become greater since Japan's election and traders should short the cross with a target of 142. That's according to a new note by a team of forex strategists at Nomura led by Yusuke Miyairi.

Japan’s voters dealt Prime Minister Ishiba Shigeru of the Liberal Democratic Party (LDP) with yet another devastating blow on Sunday, the second electoral loss since coming into office last fall.