TOKYO: Japanese Prime Minister Fumio Kishida will step down as ruling party leader in September, media reported on Wednesday, ending a three-year term marked by rising prices and marred by political scandals.

Kishida, who saw his public support erode, will not seek re-election in the Liberal Democratic Party (LDP) leader, Japanese media including public broadcaster NHK reported citing senior administration staff.

An LDP spokesperson declined to comment.

Kishida's decision to quit will trigger a contest to replace him as party boss, and by extension as the leader of the world's fourth-biggest economy.

The successor the LDP chooses could face increases in living costs, escalating geopolitical tensions, and the potential return of Donald Trump as U.S. president next year.

As the country's eighth-longest serving post-war leader, Kishida led Japan out of the COVID pandemic with massive stimulus spending, but later appointed Kazuo Ueda, an academic tasked with ending his predecessor's radical monetary stimulus, to head the Bank of Japan (BOJ).

The BOJ in July unexpectedly raised interest rates, contributing to stock market instability and sending the yen sharply lower.

If the "reporting is accurate, we should expect tighter policy or neutral but slightly tighter fiscal, monetary conditions depending on the candidate", said Shoki Omori, chief Japan desk strategist, Mizuho Securities, Tokyo.

"In short, risk-assets, particularly equities, will likely be hit the most," he added.

In another break from the past, Kishida also eschewed corporate profit-driven trickle-down economics in favour of policies aimed at boosting household incomes, including wage hikes and promoting share ownership.

 -Reuters