Japan’s Prime Minister Kishida Steps Aside. Here’s Who Could Lead Next

Japanese Prime Minister Fumio Kishida won’t run for a second term as leader of the long-ruling Liberal Democratic Party in September, opening the door for a new party member to take over the post of premier.

Kyodo News and national broadcaster NHK on Wednesday cited government sources as saying Kishida will not run in the LDP race. Kishida is due to hold a news conference at 11:30 a.m., Kyodo reported.

The yen gained against the dollar following the reports, while the Nikkei 225 stock index dropped slightly.

Given the LDP’s dominance in parliament, the winner of its leadership race, expected for late September, is virtually assured of becoming the next prime minister. Kishida’s successor will be Japan’s third prime minister since Shinzo Abe, the country’s longest-serving leader, stepped down in September 2020.

Support for Kishida has been in decline for months amid voter frustration over his handling of a wide-ranging party slush-fund scandal, ongoing inflation and a slump of the yen. Kishida, who took office nearly three years ago, decided not to run to take responsibility for the political funds issue, Kyodo said.

Read More: Japan’s Ruling Party Is Trying to Mend Its Scandal-Ridden Reputation. It’s Failing

Kishida’s predecessor, Yoshihide Suga, criticized him in a June 23 media interview and said it would be key for the LDP to bring a “sense of change” at the next leadership election.

While no general election needs to be held until 2025, some surveys show the main opposition Constitutional Democratic Party gaining on Kishida’s LDP in terms of current voting intentions. But the LDP and its junior coalition partner Komeito are expected to keep control of government given their powerful position in national politics.

It is unclear who will replace Kishida as premier, although former Defense Minister Shigeru Ishiba was the most popular choice in local media surveys. Other names that often come up in polls include Digital Transformation Minister Kono Taro, Foreign Minister Yoko Kamikawa and Shinjiro Koizumi, the son of a former premier.

“The market implication is that Japanese politics is going to be foggy,” said Shoki Omori, chief desk strategist at Mizuho Securities. “Market participants are going to dislike the uncertain situation, especially those investing in risk assets, such as equities.”