08:15 AM EDT, 08/15/2024 (MT Newswires) -- Japan's Prime Minister (PM) Fumio Kishida Wednesday announced he won't run in the LDP's leadership (governer) election, which will be held at the end of September, meaning he will step down as premier, which he became in October 2021, said UBS.

The approval rate of his administration and the LDP has been depressed since the slush fund scandals were revealed at the end of last year, wrote the bank in a note to clients. The announcement came as a surprise.

The formal date of the LDP's leadership election isn't yet determined as it will be done so next Tuesday, but it is likely to be between 20 and 29 September, stated UBS. After that, there will be no scheduled national election until the summer of next year for the Upper House, but a snap election for the Lower House, which chooses a PM, could be held anytime when the Diet session opens with the PM's discretional decision.

This means that the general election could be held in the fall of this year.

In the bank's view, as long as the LDP stays in power, the basic principle of economic policy won't change. It means business/ market-friendly policies will likely stay.

Still, there could be some differences, such as the stance on fiscal and monetary policy as well as priorities on structural reforms and energy policy, added UBS.

On the fiscal and monetary policy side, the bank knows that potential PM candidate Sanae Takaichi argued in the past that fiscal policy could be more expansive with the idea of Modern Monetary Theory. On the other hand, potential PM candidates Taro Kono and Toshimitsu Motegi said the Bank of Japan (BoJ) needs to raise the policy rate to lift the yen (JPY) ahead of the decision at the end of July.

Another potential PM candidate Shigeru Ishiba has been critical of Abenomics, which probably suggests his preference for the BoJ's earlier policy normalization and more focus on fiscal consolidation.

Anyway, UBS needs to wait for what each candidate says to find out their current policy stance/priority in more detail.