Japanese PM Fumio Kishida to step down next month

Japan's Prime Minister Fumio Kishida said he will step down next month, succumbing to public disaffection over political scandals and rising living costs that marred his three-year term, and triggering a contest to replace him.

"Politics cannot function without public trust. I made this heavy decision thinking of the public, with the strong will to push political reform forward," he said in a press conference to announce his decision not to seek re-election as the Liberal Democratic Party (LDP) leader.

The LDP will hold a contest in September to replace him as president of the ruling party, and by extension as the prime minister of Japan.

Kishida's ratings started to slide rapidly after he took office in 2021 following revelations about the LDP's ties to the controversial Unification Church. His popularity took a further hit as a slush fund of unrecorded political donations made at LDP fundraising events came to light.

Japan's Nikkei share average rose on Wednesday as investors weighed news that Japan's prime minister will step down later this year, while they positioned themselves ahead of US inflation data.

The Nikkei finished up 0.6% at 36,442.43 to secure its third consecutive day of gains, while the broader Topix closed 1.1% higher at 2,581.90.

The Nikkei initially rallied more than 1% after local media reported Japanese Prime Minister Fumio Kishida will step down as ruling party leader in September, which he later confirmed in a televised press conference.

Analysts said although the prime minister's decision to step down could add some uncertainty, the impact should be limited.

"His low approval ratings mean a significant negative reaction from equities may be avoided," said Charu Chanana, global market strategist and head of FX strategy at Saxo.

The stock market had also tracked overnight gains in Wall Street after US producer prices data buoyed bets for the Federal Reserve to cut interest rates in September.

However, the gains narrowed as investors locked in profits and attention turned to the closely-watched US consumer prices data due later on Wednesday.

While the inflation report could bolster confidence of a US rate cut, retail sales and labour-related data scheduled for later in the week remain key, Chanana said.

"Markets still remain on edge about a potential US recession and any signs of consumer strain could buoy the yen and bring another pullback in Japanese equities."

Automakers came out as the top performing sector, up 2.8%, led by over 3% gains in Toyota Motor and Honda Motor.

Among individual shares, startup investor SoftBank Group rose 1.7% to give the Nikkei the biggest lift, followed by staffing agency Recruit Holdings, up 2.5%.

Chip-testing equipment maker Advantest gained 1%, although fellow chip-related share Tokyo Electron slid 0.6%.

Reuters