TOKYO (AP) — Japanese Prime Minister Shigeru Ishiba said Monday he will stay in office to tackle challenges such as rising prices and high U.S. tariffs after a weekend election defeat left his coalition with a minority in both parliamentary chambers and triggered calls for his resignation.

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.

Japan's core inflation cooled to 3.3% in June, coming down from a 29-month high of 3.7% as food inflation showed signs of easing. The figure — which strips out costs for fresh food — was in line with the 3.3% expected by economists polled by Reuters.

The ruling LDP has only been able to remain in office as a minority government as a result of the deep divisions among the opposition parties—between the far-right and the nominally liberal parties.

Japan's core inflation slowed in June but stayed above the central bank's 2% target for well over three years, highlighting lingering price pressures that back market expectations for further interest rate rises.

Japan’s market is rallying, but bond markets are flashing warnings. With rising yields, political uncertainty, and fading trust, the current surge may not hold for long.

Japan’s inability to lift inflation is “one of the biggest unsolved challenges in the profession,” said Mark Gertler, a professor of economics at New York University who has studied the issue.

Japanese government bonds tumbled on Wednesday, sending benchmark yields to near 17-year highs, as traders priced in increased political risks and a hazy outlook for the central bank's policy normalisation path.