Japanese Prime Minister Fumio Kishida has announced that he will not seek re-election as the leader of the ruling Liberal Democratic Party (LDP) in the upcoming party elections next month. This decision will also result in Japan having a new prime minister.
At a news conference in Tokyo on Wednesday, Kishida explained that it was time for new leadership within the LDP and stated that he would offer his full support to his successor.
“In this election, it is necessary to show the people that the LDP is changing and the party is a new LDP,” Kishida told reporters.
“For this, transparent and open elections and free and vigorous debate are important. The most obvious first step to show that the LDP will change is for me to step aside. I will not be running in the forthcoming presidential election.”
Kishida had informed senior administration officials of his intention not to run, Japanese media including national broadcaster NHK reported earlier. Kishida was elected party president in September 2021 for a three-year term and won a general election shortly afterwards.
On Tuesday, Japan’s Nikkei 225 closed higher by 3.37% at 36,205.00, led by gains in the Banking, Chemical, Petroleum & Plastic and Financial Services sectors.
Japanese markets climbed significantly, driven by a rebound after last week’s volatility, which was triggered by concerns over a stronger yen and a potential U.S. recession. The positive momentum was supported by investor optimism ahead of the upcoming U.S. inflation data, which is expected to shed light on the Federal Reserve’s policy direction. The post-mortems now get underway. Japan's parliament plans a special session on Aug. 23 to discuss the Bank of Japan's decision last month to raise interest rates for the second time and signal more to come.
According to Koll, as much as 75% of the yen carry trade could have been unwound, and he expects the BOJ to increase rates further to around 1.5% by August next year.
Jean-Claude Trichet, the former head of the European Central Bank, told CNBC last week that the correction in the U.S. dollar-yen exchange rate was "long overdue" and likely "healthy" for the markets.
The yen carry trade began unwinding last week, as interest rate hikes by the Bank of Japan strengthened the yen, and led to a sharp sell-off in markets globally. Up to 75% of the yen carry trade might have been unwound, although the precise size of the carry trade remains uncertain.
After experiencing historic losses early last week, Japan's Nikkei 225 stock index saw a significant rebound, rising by as much as 3% on Tuesday.
Shinichi Uchida, the Bank of Japan deputy governor, said last Wednesday that in the face of global volatility, the bank needs to maintain monetary easing with the current policy interest rate. The BOJ summary of monetary policy meeting released a day after Uchida's statement, however, pointed to a willingness among policymakers to raise rates further.
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Global stocks climbed to record highs for the second consecutive session on Thursday, while the U.S. dollar strengthened following a stronger-than-expected jobs report.
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