TOKYO: Tokyo stocks edged higher Monday morning but a pick-up in business confidence was offset by caution after Prime Minister Shinzo Abe's ruling party suffered a huge defeat in Tokyo elections.

The Bank of Japan's Tankan business survey showed confidence among the country's biggest manufacturers rose for the third straight quarter to a more than three-year high.

However, traders were spooked after Abe's Liberal Democratic Party (LDP) suffered a crushing defeat in the Tokyo assembly election, a vote seen as a barometer of public sentiment toward his government.

"With the LDP losing more seats than expected in the Tokyo Metropolitan elections, investors are more likely to take on a wait-and-see mood, given its possible effects on national politics going forward," said Mitsuo Shimizu, deputy general manager at Japan Asia Securities.

However, he told Bloomberg News: "The Japanese economy's fundamentals haven't fallen apart. I don't see the market being sold off by any great degree given the selloff at the end of last week as well."

Tokyo's benchmark Nikkei 225 gained 0.13 percent, or 26.78 points, to 20,060.21 by the break, while the Topix index of all first-section issues was up 0.09 percent, or 1.49 points, at 1,613.39.

The index fell nearly one percent on Friday after big drops on overseas markets with technology companies taking a hit.

Buying was given some support from a weaker yen, which is positive for Japanese exporters.

The dollar stood at 112.35 yen, slightly down from 112.45 yen in New York, but stronger than the 111.97 yen in Tokyo earlier Friday.

Toyota rose 1.32 percent to 5,971 yen while Panasonic gained 1.18 percent to 1,542 yen.

Fast Retailing, a market heavyweight and operator of casual fashion chain Uniqlo, was up 0.18 percent at 37,490 yen.