Japan's ruling coalition seen losing upper house majority, polls show

+ Polls show ruling coalition struggling in upper house election

+ JGB yields rise as investors brace for looser fiscal policy

+ Uncertainty comes ahead of August deadline for US trade talks

+ PM Ishiba could meet US Treasury Secretary Bessent - Yomiuri

Tokyo, Japan - Japan's ruling coalition will likely lose its majority in the upper house election on July 20, media polls showed on Tuesday, heightening the risk of political instability at a time the country struggles to strike a trade deal with the U.S.

Japanese bond yields soared as investors braced for the possible loss of fiscal hawk Prime Minister Shigeru Ishiba, which could strain the country's already frail finances.

Ishiba's ruling Liberal Democratic Party (LDP) and its coalition partner Komeito will likely struggle to retain the 50 seats needed to defend its majority in the upper house of parliament, the Asahi newspaper said based on voter polls and nationwide reporting by its journalists.

Japan's Jiji news agency also reported on Tuesday that the ruling coalition was struggling in the election campaign, and could lose its majority in the upper house.

Ishiba's administration has seen approval ratings slide as the rising cost of living, including the soaring price of Japan's staple rice, hit households.

"Ishiba's low approval ratings reflect voter dissatisfaction with the status quo," David Boling, a director at consulting firm Eurasia Group, said in a research note, adding he sees a 60% chance of the ruling coalition losing its majority.

The political uncertainty comes at a critical time for Japan, which must clinch a trade deal with Washington by the new August 1 deadline to avoid being slapped with 25% tariffs.

Ishiba is arranging to meet U.S. Treasury Secretary Scott Bessent on Friday during his visit to Japan to attend the U.S. national day at the World Expo in Osaka, the Yomiuri newspaper reported. Japan's top government spokesperson said on Tuesday that Bessent's schedule was still being arranged.

As darkening economic prospects and rising inflation hits households, Ishiba has pledged to deliver cash payouts to cushion the blow to households from rising living costs.

But Ishiba has shunned opposition calls to cut Japan's sales tax rate. An election defeat may heighten the chance of a cut, some analysts say. It would also complicate the Bank of Japan's efforts to wean the economy off a decade-long, massive stimulus.

The risk of looser fiscal policy pushed super-long Japanese government bond yields to record-high levels.

"If the ruling coalition loses a majority, markets will be on the look-out for clues on Ishiba's fate, the new government framework and its fiscal policy stance," said Naoya Hasegawa, chief bond strategist at Okasan Securities.

(Reporting by Leika Kihara and Chang-Ran Kim; additional reporting by Kantaro Komiya and Makiko Yamazaki; Editing by Michael Perry)