With Japanese Prime Minister Shigeru Ishiba poised to step down, attention now turns to who will take the reins of the ruling Liberal Democratic Party and, potentially, the country.

The new party leader is expected to be chosen within a month. Experts said that Japan will face an impasse in economic policy and diplomacy during the reset.

According to Japanese media reports, Agriculture Minister Shinjiro Koizumi on Friday intended to run in the LDP presidency election. Former economic security minister Takayuki Kobayashi said on Tuesday that he will run in the leadership race, days after former foreign minister Toshimitsu Motegi threw his hat into the ring.

Chief Cabinet Secretary Yoshimasa Hayashi is also reported to have decided to run. Other potential contenders include former economic security minister Sanae Takaichi.

Ukeru Magosaki, director of the East Asian Community Institute and a former senior official at Japan's Ministry of Foreign Affairs, said the LDP leadership election is a struggle for power "within" the party, and a candidate's policy platform is not the key factor in determining the outcome.

Magosaki said that, aside from Ishiba himself, the lineup of candidates is almost the same as last year, and factional influence and personal relationships will continue to play a decisive role.

Inflation tops voters' concerns, with 49 percent naming it the most urgent issue, according to an August Nikkei survey.

"The most important thing is that wage increases outpace inflation," Ishiba said on Sunday at a news conference where he announced his intention to resign.

The incoming prime minister will initially have to navigate negotiations with opposition parties on the fiscal 2025 supplementary budget, as well as the fiscal 2026 budget and bills related to tax reform, which typically come together by the end of December.

Magosaki said that Japan now has "almost no room" for major policy adjustments. Even if tax cuts could gain public support, fiscal space is extremely limited.

"Therefore, whoever is elected will not differ much from Ishiba on this point," he added.

Moody's senior analyst for Japan and frontier market economies, Stefan Angrick, said on Sunday that while "the leadership transition will generate political noise, it is too early to expect major policy shifts", Nikkei Asia reported.

"The reality is that even the party's moderate faction, which favors fiscal restraint, must contend with voter dissatisfaction over inflation and the rise of right-wing populism," Angrick said. "Whoever takes office will face a challenging path."

The new party leader will also face the challenge of implementing the Japan-US tariff agreement and handling discussions on increased defense spending.

Defense spending

"Talks with the US will now move totally to defense spending, since the tariff issue is settled," Nikkei Asia cited a senior official at the Ministry of Foreign Affairs as saying. "Just as NATO was strongly pushed to increase its spending, Japan could also be pressured."

Magosaki noted that regarding Japan-US negotiations, Ishiba had emphasized that Japan "must not be underestimated", showing a certain degree of independence. However, compared with Ishiba, other candidates are expected to be "more inclined" to accommodate US demands.

Ishiba announced his resignation after only 11 months in office, and the two prime ministers before him also had relatively short tenures — Fumio Kishida served from 2021 to 2024, and Yoshihide Suga served only one year before that.

This has raised concerns that Japan may be returning to the revolving-door prime ministers that were a feature of Japanese politics before the late Shinzo Abe, who served seven years and eight months from 2012 to 2020.

Magosaki noted that this reflects the ongoing decline in support for the LDP.

Ishiba's resignation was directly triggered by the party's successive defeats in elections, though this was "not his personal fault" but rather a consequence of "the party losing the public's trust".

"When Japan faces difficulties, it struggles to implement strong policies, which allows problems to persist or worsen, making the political situation likely more unstable in the future," Magosaki added.

In a landmark political setback in July, Japan's ruling LDP-Komeito coalition lost its majority in the House of Councillors. The defeat follows a similar outcome in the 2024 House of Representatives election, leaving the ruling bloc a minority in both chambers of the parliament. On Tuesday, the party decided to hold a full-scale leadership vote on Oct 4.

houjunjie@chinadaily.com.cn