Following the finalization of a trade deal with the United States to lower President Donald Trump’s tariffs, Japanese Prime Minister Ishiba, 68, announced his resignation at a press conference. He stated that he must take responsibility for a series of electoral losses.
Since taking office less than a year ago, his ruling coalition lost its majorities in both houses of parliament amid public anger over rising living costs. He instructed his Liberal Democratic Party (LDP) to hold an emergency leadership race, adding that he would continue his duties until a successor is elected.
With an emotional tone, Ishiba said, “With Japan having signed the trade agreement and the president having signed the executive order, we have passed a key hurdle. I would like to pass the baton to the next generation.”
Koizumi and Takaichi Emerge as Possible Successors The political uncertainty prompted a sell-off in Japan’s yen currency and government bonds last week, with the yield on the 30-year bond hitting a record high on Wednesday. Investors are focused on whether Ishiba will be replaced by a proponent of looser fiscal and monetary policy, such as LDP veteran Sanae Takaichi, who has criticized the Bank of Japan’s interest rate hikes.
Ishiba narrowly defeated Takaichi in last year’s LDP leadership run-off. Shinjiro Koizumi, a prominent political figure and Ishiba’s farm minister, is also a possible successor.
Economist Kazutaka Maeda said, “Given the political pressure mounting on Ishiba after the LDP’s repeated election losses, his resignation was inevitable.” Maeda added, “While Koizumi is not expected to bring major changes, Takaichi’s stance on expansionary fiscal policy and her cautious approach to interest rate hikes could draw scrutiny from financial markets.”
Since the ruling coalition has lost its parliamentary majority, the next LDP president is not guaranteed to become prime minister, though it is likely as the party remains the largest in the lower house. Analysts suggest the new leader may call a snap election to seek a mandate.
‘No Time to Lose’ Ishiba, who became party leader last September on his fifth attempt, wrapped up his brief tenure by completing a trade deal with Japan’s biggest trading partner, which includes a pledge of $550 billion in investments in exchange for lower tariffs.
The tariffs imposed by Trump, especially on Japan’s critical automotive sector, had forced the country to downgrade its already weak growth outlook for the year. Ishiba expressed hope that his successor could ensure the deal is executed and that Japan continues generating wage gains to alleviate voter concerns over living costs.
He also voiced concerns about the security environment his successor will inherit, pointing to an unprecedented gathering of Chinese, Russian, and North Korean leaders in Beijing for a military parade last week.
Yoshinobu Tsutsui, chairman of Japan’s largest business lobby, Keidanren, said there was “no time to lose” with mounting domestic and international challenges. “We hope the new leader will foster unity within the party, establish stable political conditions, and move swiftly to implement necessary policies,” Tsutsui said.
