Japan’s Prime Minister Fumio Kishida has announced his decision to step down next month, marking the end of his three-year tenure.
This decision follows a significant decline in public support due to a series of political scandals and rising living costs.
Kishida’s resignation will trigger a leadership contest within the ruling Liberal Democratic Party (LDP) to determine his successor.
Falling approval ratings and political scandals
Kishida’s popularity began to wane shortly after he assumed office in 2021, following revelations about the LDP’s connections to the controversial Unification Church.
The situation worsened when a slush fund of unrecorded political donations linked to LDP fundraising events was exposed.
Public dissatisfaction grew as wages failed to keep pace with the rising cost of living, despite Japan’s recovery from years of deflationary pressure.
Kishida acknowledged the impact of these issues on his leadership, stating, “Politics cannot function without public trust,” during the press conference where he announced his decision not to seek re-election as the LDP leader.
The LDP is expected to hold a leadership contest in September, with the winner set to become Japan’s next prime minister.
Key highlights under Kishida’s rule
During his time in office, Kishida implemented policies aimed at boosting household incomes, breaking from previous economic strategies that focused on corporate profit-driven trickle-down economics.
These policies included wage hikes and promoting share ownership, which were part of his efforts to address income inequality in Japan.
Kishida also played a significant role in leading Japan out of the COVID-19 pandemic by implementing massive stimulus spending.
He appointed Kazuo Ueda as the head of the Bank of Japan (BOJ) to guide the country out of his predecessor’s radical monetary stimulus.
The BOJ’s unexpected decision to raise interest rates in July, amidst rising inflation, contributed to stock market instability and a sharp increase in the yen’s value.
Kishida’s departure could lead to tighter fiscal and monetary conditions depending on who succeeds him, according to Shoki Omori, chief Japan desk strategist at Mizuho Securities in Tokyo. Omori noted that “risk-assets, particularly equities, will likely be hit the most” under new leadership.
Kishida’s tenure also saw a shift in Japan’s security policy, as the country responded to an increasingly volatile geopolitical environment.
He unveiled Japan’s largest military buildup since World War Two, committing to double defence spending to counter potential threats from neighbouring China.
Kishida mended strained relations with South Korea, enabling closer security cooperation with the US to address the growing threat from North Korea’s missile and nuclear weapons programmes.
Japan’s search for a new leader
As the LDP prepares for a leadership contest, several names have emerged as potential successors to Kishida.
Former Defence Minister Shigeru Ishiba has already expressed his interest in running, while Foreign Minister Yoko Kamikawa, Digital Minister Taro Kono, and former Environment Minister Shinjiro Koizumi are also considered strong contenders.
Political analysts believe that the LDP must choose a leader who can distance the party from the scandals that have plagued it in recent years.
A fresh face with no ties to the current administration is seen as crucial for the party’s survival in the upcoming general election, which is due by the third quarter of 2025.
Political analyst Atsuo Ito said,
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. The party must choose someone young who has no ties with the present administration and thus can present a new LDP.
The LDP’s decision will not only determine the next prime minister but will also shape Japan’s political landscape as the country navigates a challenging economic and geopolitical environment.
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