Japanese Prime Minister Shigeru Ishiba announced his resignation on Sunday, a decision that risks triggering a period of political instability for the world’s fourth-largest economy. The 68-year-old leader, who has seen his ruling coalition’s popularity plummet amid voter anger over rising living costs, instructed his Liberal Democratic Party (LDP) to hold an emergency leadership race. Ishiba stated he would remain in his role until a successor is chosen, marking a swift end to a tenure of less than a year.
Ishiba’s resignation follows his coalition’s loss of its parliamentary majorities in both houses, with the final blow being a defeat in July’s upper house election. He had previously resisted calls to step down, focusing instead on finalizing a critical trade deal with the United States. That agreement, designed to mitigate the impact of President Donald Trump’s tariffs on Japan’s auto industry, was completed last week. “We have passed a key hurdle,” an emotional Ishiba stated, adding, “I would like to pass the baton to the next generation.”
The political uncertainty has already unsettled financial markets, causing a sell-off in the yen and government bonds. Attention now turns to the potential successors, with LDP veteran Sanae Takaichi and telegenic farm minister Shinjiro Koizumi seen as front-runners. A victory for Takaichi, an advocate of looser fiscal and monetary policy who has criticized the central bank’s interest rate hikes, would be closely scrutinized by investors.
Whoever wins the party leadership faces a complex political landscape, as the LDP no longer holds a majority in either chamber of parliament. This means the next LDP leader is not guaranteed to become prime minister and may feel compelled to call a snap election to seek a public mandate. Such a move would be a gamble, given the recent gains of far-right parties and a public that, according to a recent Kyodo news poll, is largely opposed to an early vote.
