After taking office in September last year, Ishiba has suffered a string of electoral defeats during his short term, as well as the LDP’s upper house electoral defeat in July. Japanese Prime Minister Shigeru Ishiba has “decided to resign as LDP President,” according to a media release from Ishiba reported by Reuters. Previously reported by the news agency, a source informed Reuters on Sunday that he would also resign as Prime Minister in an effort to avoid deeper divisions within his ruling Liberal Democratic Party (LDP). The result throws the world’s fourth-largest economy into a fresh round of political uncertainty.
Since taking office in September last year, Ishiba faced a series of electoral defeats, including the LDP’s upper house electoral defeat in July, and analysts contend that voter frustration over rising living costs has been a driving factor behind the electoral losses.
Even with calls from within the LDP to accept responsibility and resign, Ishiba had until now resisted resigning and instead focused on negotiations with Washington concerning the trade tariffs affecting Japan’s automotive industry.
Potential successors
Speculation has begun as to who might take Ishiba’s place — assuming that he resigns as the PM himself. Fiscal dove Sanae Takaichi, who lost a narrow party leadership contest to Ishiba roughly a year ago, is seen as a serious option. She has been very vocal about the Bank of Japan’s rate hikes, opposed to monetary tightening, and would advocate a more expansionary fiscal stance. Another name mentioned is Shinjiro Koizumi, the farm minister with the impossible job of stabilizing surging food prices and son of the legendary former Prime Minister Junichiro Koizumi.
“Kazutaka Maeda, an economist with the Meiji Yasuda Research Institute, told Reuters that given the political pressure mounting on Ishiba after the LDP suffered election losses on repeat, his resignation was practically unavoidable. “At this point, Koizumi and Takaichi are the most probable suspects. Koizumi is generally not expected to make any big changes, but Takaichi’s position on expansionary fiscal policy and cautious interest rate hikes has potential market implications,” said Maeda.
Final moves in office
If he moves out as PM, one of Ishiba’s last acts as prime minister could have been sealing a trade deal with Washington last week. As part of the agreement, Japan agreed to $550 billion in investments in exchange for US President Donald Trump lowering tariffs on Japan’s critical automobile exports.
The uncertainty in politics has already been felt in financial markets, as the yen and Japanese government bonds came under pressure last week with the 30-year bond yield hitting a record high on Wednesday according to Reuters.
Speculation over the Ishiba exit grew after the LDP planned a vote on Monday on whether to call an emergency leadership election.
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