Japanese Prime Minister Shigeru Ishiba announced on Sunday that he will resign, setting up an emergency leadership contest within the ruling Liberal Democratic Party (LDP) and plunging Japan into political uncertainty at a fragile economic moment.
Ishiba, 68, told reporters he would remain in office until a successor is chosen, instructing the LDP, which has dominated Japanese politics for most of the postwar era, to hold a leadership vote as early as this week. The decision comes less than a year after Ishiba took power, during which time his coalition has suffered back-to-back election defeats in both houses of parliament.
Mounting voter anger over rising living costs and Japan’s sluggish growth has battered Ishiba’s approval ratings. Pressure intensified following the LDP’s setback in July’s upper house vote, with critics inside the party calling for him to step aside.
“Now that Japan has signed the trade agreement with the United States and the president has signed the executive order, we have passed a key hurdle,” Ishiba said, referring to his recent deal with President Donald Trump on U.S. tariffs that had rattled Japan’s auto industry. “I would like to pass the baton to the next generation.”
Markets reacted to the turbulence last week, sending the yen lower and pushing yields on 30-year Japanese government bonds to record highs. Investors are now weighing the possibility of Ishiba being replaced by a leader favoring looser fiscal and monetary policy.
Two names stand out as possible successors: Sanae Takaichi, an LDP veteran who has criticized the Bank of Japan’s rate hikes and called for more expansionary policies, and Shinjiro Koizumi, the high-profile farm minister and son of former Prime Minister Junichiro Koizumi, who has gained attention for tackling food price inflation.
“Given the political pressure mounting on Ishiba after the LDP’s repeated election losses, his resignation was inevitable,” said Kazutaka Maeda, economist at Meiji Yasuda Research Institute. “Koizumi and Takaichi are the most likely candidates. While Koizumi would not bring major changes, Takaichi’s stance on fiscal expansion and monetary policy could draw scrutiny from financial markets.”
With the LDP lacking a majority in either chamber, the leadership race may not guarantee the next party president the premiership. Analysts say the eventual winner could call a snap election to consolidate power.
Meanwhile, Japan’s opposition remains fractured, but July’s strong performance by the far-right Sanseito party, which has campaigned on anti-immigration policies, signals shifting dynamics that could shape the country’s next political chapter.
