Japanese lawmakers prep leadership bids after PM resigns, yen sinks

TOKYO – Former Japanese foreign minister Toshimitsu Motegi on Sept 8 became the first ruling party lawmaker to throw his hat into the ring to succeed outgoing Japanese Prime Minister Shigeru Ishiba, as financial markets whipsawed on the political uncertainty.

Mr Ishiba called time on his brief tenure on Sept 7, saying he was taking responsibility for a bruising election that saw his ruling coalition lose its majority in both Houses of Parliament amid voter anger over rising cost of living.

He instructed his Liberal Democratic Party (LDP) – which has governed Japan for most of its post-war history – to hold an emergency leadership election.

The party plans to hold the vote on Oct 4, an LDP official close to the matter told Reuters.

Japan’s yen slumped and stocks surged on Sept 8 after Mr Ishiba’s resignation stoked speculation that his potential successors, such as fiscal dove Sanae Takaichi, may ramp up spending in the world’s most indebted advanced economy.

“The LDP is facing its worst crisis since its founding,” Mr Motegi, 69, told reporters on Sept 8 as he announced his plan to stand for leadership.

“We must unite quickly to tackle our serious challenges at home and abroad and move the country forward.”

Chief Cabinet Secretary Yoshimasa Hayashi also intends to run in the election, a source close to the government’s top spokesman told Reuters.

The front runners, however, are LDP veteran Takaichi and Mr Shinjiro Koizumi – a political scion and son of former prime minister Junichiro Koizumi, who gained prominence as Mr Ishiba’s farm minister, tasked with trying to rein in soaring rice prices.

Both would mark milestones for Japan: Ms Takaichi, 64, would be its first female leader, and Mr Koizumi, 44, its youngest in the modern era.

Neither has formally announced their candidacy, but they finished second and third respectively in the last leadership contest in September 2024.

“All indications are that it will come down to them facing off against each other,” said Professor Jeffrey Hall, a Japanese studies lecturer at Kanda University of International Studies.

Conservative contender

Of most consequence for investors and Japan’s diplomatic relations would be Ms Takaichi, who has held a number of posts, including as minister of economic security and internal affairs.

She stands out for her opposition to the Bank of Japan’s (BOJ) interest rate hikes and her calls to ramp up spending to boost the fragile economy.

Investors are betting the political hiatus alone will delay the BOJ’s monetary policy tightening plans.

Money markets are now pricing in a roughly 20 per cent chance of the BOJ hiking rates by the end of October, down from 46 per cent a week ago.

The expected leadership bid of the nationalistic Ms Takaichi will also be closely watched by Japan’s powerful neighbour China.

Known for conservative positions such as revising the pacifist postwar Constitution, Ms Takaichi is a regular visitor to the Yasukuni shrine to honour Japan’s war dead, viewed by Beijing and others as a symbol of past militarism.

Earlier in 2024, Ms Takaichi also visited Taiwan, the democratic island claimed by China, where she suggested Taiwan, Japan and other partners could form a “quasi-security alliance”.

Prof Hall of Kanda University said: “China might take a more hostile stance towards Japan, because she depicts herself as very much a hawk regarding China.” REUTERS