Political earthquake in Japan: Prime Minister Isiba decides to resign

The political crisis continues in Japan . Prime Minister Shigeru Ishiba has reportedly decided to resign.

The prime minister made the decision to avoid a split within his ruling Liberal Democratic Party, public broadcaster NHK reported. LDP lawmakers are to vote tomorrow on whether to hold an extraordinary leadership election. Under Ishiba’s leadership, the LDP-led coalition has lost its majority in both houses of parliament since coming to power last year, amid voter anger over rising living costs. LATEST TRADE DEAL WITH THE US Ishiba’s government finalized details of a trade deal with the US last week. Under this agreement, Japan pledged $550 billion in investments in exchange for US President Donald Trump reducing tariffs on Japan’s vital auto sector. ECONOMIC CRISIS Ishiba has rejected calls within his party to resign and has not taken responsibility for his defeat in the upper house in July. Concerns about political uncertainty sparked a sell-off in the yen and Japanese government bonds last week, with the yield on 30-year bonds reaching a record high on Wednesday. POSSIBLE SCENARIOS Political paralysis could further damage an economy already battered by US tariffs. However, markets are focusing more on the possibility of Ishiba being replaced by a more liberal fiscal and monetary policy advocate, such as Sanae Takaichi, who has criticized the Bank of Japan's interest rate hikes. Ishiba narrowly defeated Takaichi in the LDP leadership race.