Japan in Turmoil: What Comes Next After Prime Minister Ishiba Resigns?

Ben Graham · Setembro 8

Japan in Turmoil: Prime Minister Ishiba Resigns After Election Defeat, LDP Leadership Vote Set for October 4

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Japanese politics was shaken this week as Prime Minister Shigeru Ishiba announced his resignation as both head of government and president of the ruling Liberal Democratic Party (LDP). Ishiba stepped down after a crushing election defeat that saw the LDP and its coalition partners lose their majority in both houses of parliament.Voters, frustrated by the rising cost of living, punished the government at the polls. Ishiba took full responsibility, stating that he could no longer lead after the decisive loss.

Market Reaction: Yen Weakens on Surprise Resignation

Financial markets were caught off guard. The Japanese yen (JPY) opened the week sharply lower, with USDJPY gaping higher before backing off and stabilizing. Traders speculated that the Bank of Japan (BOJ) may have stepped in covertly to sell dollars and contain volatility.

USDJPY 1 HOUR CHART Sept 8, 2026

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Next Steps for the LDPThe LDP will hold an emergency leadership election on October 4 to select its next leader, who will also become the new Prime Minister of Japan. Ishiba will remain in office in a caretaker role until the vote is complete.

Unlike a full party-wide election, which involves roughly 750 votes, an emergency vote is limited to about 420–430 ballots:

• Around 370–380 votes from LDP members of the Diet (House of Representatives + House of Councillors).
• 47 votes from prefectural party chapters (one each).

This system gives an advantage to candidates backed by large LDP factions, since grassroots party members have little influence in an emergency contest.

The Candidates to Watch

At least four contenders are expected to compete for the top job:

1. Sanae Takaichi (64) – Former economic security and internal affairs minister. A known fiscal dove, she would become Japan’s first female prime minister if elected.
2. Shinjiro Koizumi (44) – Son of former Prime Minister Junichiro Koizumi and currently Minister of Agriculture. Known for his reformist image, he would be the youngest prime minister in Japan’s history.
3. Yoshimasa Hayashi (64) – The Chief Cabinet Secretary, considered a moderate and steady hand.
4. Toshimitsu Motegi (69) – Former foreign minister who has officially declared his candidacy.

How the LDP Emergency Vote Works

The leadership election follows a two-round system:

• Round One: A candidate who wins a majority outright becomes party leader.
• Round Two: If no one wins a majority, the top two candidates face a runoff decided only by Diet members, excluding prefectural chapters.
This process favors candidates with strong factional backing inside the LDP, reducing the impact of younger or grassroots-backed challengers.

What This Means for Japan’s Future

The October 4 LDP leadership election will determine not only Japan’s next prime minister but also the direction of its economic and foreign policy. With three of the four leading candidates in their 60s, the generational divide is clear. Shinjiro Koizumi’s youth could appeal to the public, but the LDP’s faction-driven emergency process makes his path more difficult and aq hard one to call.

With a lack of majority, the new prime minister will need to find include coalition (existing or new) partners to form a government.
For investors, the immediate outcome is clear: political uncertainty in Japan is likely to keep the yen volatile and discourage the BOJ from tightening monetary policy in the near term. Markets will closely watch which candidate emerges as leader and whether the LDP can restore stability after Ishiba’s sudden exit.

Reminder: in Global Trading: It is The Reaction to News that Matters

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