Prime Minister Fumio Kishida announced he would step down in September after a three-year term marked by political scandal to make way for a new prime minister to tackle the impact of soaring prices.
“Politics cannot function without the trust of the people,” Kishida said at a press conference on Wednesday announcing his decision not to seek re-election as LDP president.
“From now on, as a party member, I will focus on supporting the newly elected president of the LDP,” he said.
His decision to step down will set off a battle to replace him as party leader and, ultimately, leader of the world’s fourth-largest economy.
Kishida’s approval rating has fallen amid revelations about the LDP’s controversial ties to the Unification Church and unrecorded political donations at the party’s fundraising events.
But he also faced public dissatisfaction that wages were not keeping up with rising living costs, even as the country finally emerged from years of deflationary pressures.
“The incumbent LDP prime minister cannot run for the party presidency unless he is sure of victory. It’s like a sumo yokozuna. He doesn’t just have to win, he has to win with grace,” says Nakano Koichi, a professor of political science at Sophia University.
Whoever succeeds Kishida as LDP leader will have to unite a fragmented ruling bloc and grapple with rising living costs, rising geopolitical tensions with China and the possibility of Donald Trump returning to the U.S. presidency next year.
From Corona to Inflation
As the eighth-longest-serving post-war prime minister, Kishida led Japan out of the coronavirus pandemic with a massive economic stimulus package and appointed Ueda Kazuo, an academic tasked with ending his predecessor’s radical monetary easing, as governor of the Bank of Japan.
With inflation gaining momentum, the Bank of Japan unexpectedly raised interest rates in July, destabilizing stock prices and causing the yen to plummet.
Kishida’s resignation could mean a tightening of fiscal and monetary conditions, depending on the candidate, said Omori Yoshiki, chief Japan strategist at Mizuho Securities in Tokyo.
“The bottom line is that risk assets, especially equities, are likely to be the hardest hit,” he said.
In another break from the past, Kishida eschewed trickle-down economics driven by corporate profits in favor of policies aimed at boosting household incomes, such as raising wages and encouraging stock ownership.
Defense Budget
Despite a shift in economic policy, Prime Minister Abe has stuck to the hardline security policies of his predecessor, Shinzo Abe, who was assassinated in 2022.
Abe announced Japan’s largest military buildup since World War II, pledging to double defense spending to deter neighboring China from using military force to pursue its territorial ambitions in East Asia.
Working from Washington, Kishida also repaired tense relations between Japan and South Korea, allowing them and their common ally the United States to pursue deeper security cooperation to counter threats from North Korea’s missile and nuclear weapons programs.
“Under Prime Minister Kishida’s firm leadership, Japan and the United States have ushered in a new era of our alliance,” U.S. Ambassador to Japan Rahm Emanuel said in a post on TwitterX.
