Japan's Prime Minister Kishida to Resign, Paving Way for New Leader

"Politics cannot function without public trust. I made this heavy decision thinking of the public, with the strong will to push political reform forward," he said in a press conference to announce his decision not to seek re-election as the Liberal Democratic Party (LDP) leader, Reuters reported.

The LDP will hold a contest in September to replace him as president of the ruling party, and by extension as the prime minister of Japan.

Kishida ratings started to slide rapidly after he took office in 2021 following revelations about the LDP's ties to the controversial Unification Church. His popularity took a further hit as a slush fund of unrecorded political donations made at LDP fundraising events came to light.

He also faced public discontent over the failure of wages to keep pace with rising living costs as the country finally shook off years of deflationary pressure.

"An LDP incumbent prime minister cannot run in the presidential race unless he's assured of a victory. It's like the grand champion yokozunas of sumo. You don't just win, but you need to win with grace," said Koichi Nakano, political science professor at Sophia University.

Whoever succeeds Kishida as LDP leader must restore the public's confidence in the party and tackle the rising cost of living, escalating geopolitical tensions with China, and the potential return of Donald Trump as US president next year.

Through his stint as the country's eighth-longest serving post-war leader, Kishida broke from previous economic policy by eschewing corporate profit-driven trickle-down economics in favor of policies aimed at boosting household incomes, including wage hikes and promoting share ownership.

He led Japan out of the COVID pandemic with massive stimulus spending and also appointed academic Kazuo Ueda as head of the Bank of Japan (BOJ) to guide Japan out of his predecessor's radical monetary stimulus.

The BOJ in July unexpectedly raised interest rates as inflation took hold, contributing to stock market instability and sending the yen sharply higher.

Kishida's departure could mean tighter fiscal and monetary conditions depending on the candidate, according to Shoki Omori, chief Japan desk strategist at Mizuho Securities in Tokyo.

"In short, risk-assets, particularly equities, will likely be hit the most," he said.

Kishida's premiership was also marked by a rapidly changing security environment which pushed Japan to revisit its traditionally pacifist policy.

He unveiled Japan's biggest military buildup since World War Two with a commitment to double defense spending aimed at deterring neighboring China from pursuing its territorial ambitions in East Asia through military force.

With prodding from Washington, Kishida also mended Japan's strained relations with South Korea, enabling the two countries and their mutual ally, the US, to pursue deeper security co-operation to counter the threat posed by North Korea's missile and nuclear weapons programs.

"Personally, I wish he continued a little bit more as prime minister. Maybe he was stressed (with the low ratings), and with all the circumstances around him, I guess he has no choice but to step down," said Naoya Okamoto, a 22-year-old office worker in Tokyo.

Former defense minister, Shigeru Ishiba, has already thrown his hat into the ring as a prospective replacement for Kishida, saying he would like to "fulfil his duty" if he gathers enough support, according to public broadcaster NHK.

Other names that have been floated as potential contenders include Foreign Minister Yoko Kamikawa, Digital Minister Taro Kono, and former Environment Minister Shinjiro Koizumi.

Experts say that the LDP will have to pick a fresh face that breaks from the scandals that have mired the party recently to survive a general election, which is due by the third quarter of 2025 at the latest.

"If the LDP picks its next leader in a way that disregards public criticism against political funding scandals, the party could suffer a crushing defeat," political analyst Atsuo Ito said.

"The party must choose someone young who has no ties with the present administration and thus can present a new LDP," he added.