Japanese Prime Minister Shigeru Ishiba announced on Sunday that he will step down, ending a rocky year in office marked by sharp election setbacks and growing frustration over
the economy.
Ishiba, 68, told reporters he had asked his ruling Liberal Democratic Party (LDP) to hold an emergency leadership contest. He will stay on until a successor is chosen.
Since taking office less than a year ago, Ishiba has watched his coalition lose control of both houses of parliament. Rising living costs and dissatisfaction with the government’s handling of the economy fueled voter anger, and July’s upper house election was the final blow.
Until now, Ishiba had resisted pressure to resign, choosing instead to focus on a trade deal with the U.S. aimed at easing tensions over tariffs that hit Japan’s crucial auto industry. But with the deal signed last week, Ishiba said the time was right to hand over power.
“With Japan having signed the trade agreement and the president having signed the executive order, we have passed a key hurdle,” he said, appearing emotional. “I would like to pass the baton to the next generation.”
The uncertainty around his future has already rattled markets. Japan’s currency and government bonds sold off last week, pushing the 30-year bond yield to a record high.
Who could succeed him?
The LDP will move quickly to choose a new leader. Two names stand out:
- Sanae Takaichi, a veteran lawmaker who has criticized recent Bank of Japan rate hikes and favors more aggressive government spending.
- Shinjiro Koizumi, the charismatic farm minister and son of former Prime Minister Junichiro Koizumi, who has gained attention for tackling soaring food prices.
Ishiba narrowly defeated Takaichi in last year’s leadership race, but both she and Koizumi are now seen as frontrunners.
“Given the repeated election losses, his resignation was inevitable,” said Kazutaka Maeda, an economist at Meiji Yasuda Research Institute. “Markets will be watching closely, especially if Takaichi takes over and pushes for looser fiscal and monetary policies.”
What happens next?
The LDP no longer holds a majority in either chamber of parliament, meaning whoever takes over may struggle to govern effectively. Some analysts think the new leader could call a snap election to secure a mandate, though polls suggest most voters don’t want one right now.
Meanwhile, the opposition remains fractured — but the far-right Sanseito party has been gaining traction, turning once-fringe ideas into part of the mainstream debate.
Ishiba’s final act as prime minister was to seal the U.S. trade deal, under which Japan pledged $550 billion in investments in exchange for tariff relief from Washington. Photo by 首相官邸 (PMO), Wikimedia commons.