Japanese Prime Minister Shigeru Ishiba announced his resignation on Sunday, citing responsibility for a string of election defeats that weakened his ruling Liberal Democratic Party (LDP). The 68-year-old leader, who secured a U.S.-Japan trade deal to ease tariffs imposed by President Donald Trump, said it was time to “pass the baton to the next generation.”
Ishiba’s exit follows his coalition’s loss of majorities in both houses of parliament, fueled by public frustration over rising living costs. The LDP will hold an emergency leadership election, with Ishiba staying in office until a successor is chosen. Potential replacements include Sanae Takaichi, known for supporting looser fiscal and monetary policies, and Shinjiro Koizumi, the farm minister tasked with curbing price surges.
Markets reacted nervously, with Japan’s yen and long-dated government bonds under pressure amid concerns over policy uncertainty. Analysts warn that Takaichi’s stance on fiscal expansion and opposition to rate hikes could draw market scrutiny, while Koizumi is expected to maintain continuity.
Although the LDP remains the largest party in the lower house, its lost majority means the next leader may not automatically become prime minister. Some analysts suggest a snap election could be called to secure a mandate. The opposition remains fragmented, though the far-right Sanseito party gained momentum in recent elections.
Ishiba’s resignation comes after finalizing a trade pact that pledged $550 billion in investments in exchange for tariff relief, particularly for Japan’s auto industry. He expressed hope that his successor would execute the deal and address voter concerns over wages and costs.
With geopolitical tensions rising, business leaders urged swift action to restore stability. Voters, too, voiced hopes for a leader capable of managing tariffs and strengthening diplomacy during uncertain times.