Tokyo: Japan is entering a period of political uncertainty following the resignation of Prime Minister Shigeru Ishiba after a series of bruising election defeats that cost the ruling Liberal Democratic Party (LDP) its majority in both houses of parliament. Ishiba, who took office in October 2024, announced he would step down but remain in office until a new party leader is chosen.

Ishiba accepted responsibility for the losses, stating that fresh leadership was needed to restore confidence in the LDP. His decision came only weeks after sealing a landmark $550 billion U.S.–Japan investment deal aimed at securing tariff reductions and boosting economic ties.

The resignation has unsettled financial markets. The yen weakened to fresh lows against major currencies while government bond yields surged to record levels, reflecting investor concerns over Japan’s fiscal and policy direction.

Attention now shifts to the race for Ishiba’s successor. Among the key contenders is Sanae Takaichi, a conservative former internal affairs minister and economic security chief, who is seen as the front-runner. Known for her strong fiscal stimulus stance and hawkish views on security, Takaichi would become Japan’s first female prime minister if elected. Agriculture Minister Shinjiro Koizumi, the media-savvy son of former Prime Minister Junichiro Koizumi, is also expected to compete, appealing to younger voters with reformist positions.

Other prominent candidates include Toshimitsu Motegi, a veteran lawmaker and former foreign minister who has formally announced his candidacy, and Chief Cabinet Secretary Yoshimasa Hayashi, who is widely expected to join the race.

The LDP is expected to hold an emergency leadership election on October 4. However, with no clear parliamentary majority, the new leader may need opposition support to govern effectively or consider calling a snap general election to secure a stronger mandate.

The outcome will have far-reaching consequences for Japan’s economic strategy, its approach to monetary policy, and its security posture in the Asia-Pacific region. Observers note that the leadership choice could redefine Japan’s role in regional geopolitics while also determining the ruling party’s ability to hold off rising opposition forces such as the populist Sanseito party.