TOKYO — Japanese Prime Minister Fumio Kishida announced he will resign in September, marking the end of a three-year term overshadowed by various political issues and allowing a new leader to tackle escalating prices.

“I will do everything I can as prime minister until the end of my term in September,” Kishida said in a news conference where he revealed his decision to not run for re-election as leader of the Liberal Democratic Party (LDP).

This choice opens up a competition for his successor as the party leader and, consequently, the leader of Japan’s fourth-largest economy. Kishida’s popularity has decreased due to controversies around the party’s involvement with the disputed Unification Church and recent issues with undisclosed donations at LDP fundraising events.

“He’s been a dead man walking for quite some time,” stated Michael Cucek, a political science professor at Temple University, Tokyo. “It was impossible to gather enough support for his re-election,” he added.

The upcoming leader chosen by the LDP will need to unify a divided ruling faction and confront anticipated rises in living expenses, along with increasing geopolitical tensions with China, and the potential return of Donald Trump to the presidency in the U.S. next year.

Kishida, who is the eighth-longest-serving leader in Japan since World War II, guided Japan through the aftermath of the COVID pandemic with considerable financial stimulus. However, he later appointed Kazuo Ueda, an academic, to lead the Bank of Japan and shift away from his predecessor’s aggressive monetary policies.

In July, the bank unexpectedly raised interest rates as inflation took effect, leading to instability in the stock market and a significant drop in the yen’s value. Depending on who is chosen as Kishida’s replacement, fiscal and monetary policies might tighten, according to Shoki Omori, chief strategist of Mizuho Securities in Tokyo.

“In summary, particularly equities may face the most severe impacts,” he noted.

In a departure from previous approaches, Kishida moved away from corporate profit-driven trickle-down models, focusing instead on enhancing household income, which included advocating for wage increases and encouraging share ownership.