Japanese Prime Minister Fumio Kishida has announced he will not seek a second term as leader of the Liberal Democratic Party (LDP) in September, paving the way for a new leader and a subsequent change in the prime minister’s position.
“I will devote myself to supporting the new leader selected through the presidential election as a foot soldier,” Kishida said at a nationally broadcast news conference on Wednesday.
Given the LDP’s dominance in parliament, the winner of its leadership race, expected for late September, is virtually assured of becoming the next prime minister. Kishida’s successor will be Japan’s third prime minister since Shinzo Abe, the country’s longest-serving leader, stepped down in September 2020.
The yen strengthened on the news, rising about 0.3% against the dollar at 12:08 p.m. in Tokyo, while Japanese share indexes were mixed, with the Nikkei down 0.2% and the Topix gaining 0.5%. Japanese government bond futures were little changed.
Support for Kishida has been in decline for months amid voter frustration over his handling of a wide-ranging party slush-fund scandal, ongoing inflation and a slump of the yen. Kishida, who took office nearly three years ago, said the series of political finance scandals has eroded trust and weighed on his decision.
Kishida’s government and the central bank have sought to show a united front and restore calm to financial markets, after the biggest stocks plunge in more than three decades this month triggered criticism of monetary policy tightening and cast a shadow over efforts to get households to invest their assets.
Kishida’s predecessor, Yoshihide Suga, criticized Kishida in a June 23 media interview and said it would be key for the LDP to bring a “sense of change” at the next leadership election.
“The first and most obvious step to show that the LDP will change is for me to step aside,” Kishida said Wednesday.
While no general election needs to be held until 2025, some surveys show the main opposition Constitutional Democratic Party gaining on Kishida’s LDP in terms of current voting intentions.
The next premier may still call an election to firm up the new government’s mandate. But the LDP and its junior coalition partner Komeito are expected to easily keep control given their powerful position in national politics.
It is unclear who will replace Kishida as premier, although former Defense Minister Shigeru Ishiba was the most popular choice in local media surveys. Other names that often come up in polls include Digital Transformation Minister Taro Kono, Foreign Minister Yoko Kamikawa and Shinjiro Koizumi, the son of a former premier.
“The market implication is that Japanese politics is going to be foggy,” said Shoki Omori, chief desk strategist at Mizuho Securities. “Market participants are going to dislike the uncertain situation, especially those investing in risk assets, such as equities.”
