Japan's Prime Minister Yukio Hatoyama said Wednesday that he and his powerful No. 2 party would go off after a slide in opinion polls endangered their party's chances in an election expected next month.
The yen sank to a two-week low against the dollar after Hatoyama was the fourth Japanese leader to leave office in a year or less, with some investors fear that political instability would make Japan's weak economy more dependent on the Bank of Japan ease monetary policy.
Invitations built in Hatoyama's Democratic Party of Japan (DPJ) for him to resign in order to revive the party's fate ahead of elections for the upper house is expected 11 July that it must win to level the political.
With tears in his eyes, Hatoyama said the party legislators that he and the party secretary general Ichiro Ozawa would resign.
"In order to reinvigorate our party, we must bring back clean Democratic Party. I will ask for your cooperation," Hatoyama said.
Hatoyama rating slipped on voters' doubts about his leadership, while the old style photo of Ozawa, who is seen as pulling the strings behind the scenes, had also weakened public support.
Analysts have tipped outspoken finance minister Naoto may as frontrunner to replace Hatoyama, who was terminated after only eight months in the job. A new chairman will be elected on Friday, in a few days, said a party leader.
Recent political unrest, including the departure of a small leftist party from the coalition government, has distracted the government prepare a plan to cut the large public debt and a strategy to engineer growth despite a rapidly aging population.
"Hatoyama departure could lead to delays in the planned publication this month of the state's growth policies and fiscal discipline objectives. Who will replace Hatoyama had to work them out before an upper house election, or disappoint the voters," said Hirokata Kusaba, an economist at Mizuho Research Institute.
"Things can not get worse after Hatoyama completed since the current impasse on many major issues."
The yen fell to $ 91.78 per team 91.10 before the news, but this weakness helped increase the Nikkei share average, which is densely populated by major Japanese exporters. Bond futures fell more.
FINMIN MAY BE NEXT?
Ministry of Finance, CAN has previously pressed the Bank of Japan to do more to fight deflation and has heard more positive than Hatoyama to increase five percent sales tax in the future to finance the swelling social security costs.
This position will be welcomed by investors worried about Japan's huge public debt, which is almost 200 percent of GDP.
"If the Treasury can do would be welcome news for the JGB market, which CAN be more proactive about fiscal discipline and increasing the consumption tax than any other minister," Mizuho Research's Kusaba said.
Democrats came to power in August last year after a landslide election victory for the powerful lower house of parliament, ousting the conservative Liberal Democratic Party (LDP), after more than 50 years of almost non-stop rule.
But doubts Hatoyama leadership skills have eroded state support, with a poll showing support at just 17 percent after he failed to keep a campaign promise to move an American air base outside Okinawa island in southern Japan.
Some analysts say that changing the party's two top leaders will help to restore Democrats' popularity ahead of elections, although many voters were outraged when two leaders of former LDP-led governments to end abruptly after only one year in office.
"Although getting rid of Ozawa and Hatoyama will not win back all that support, at least the Democrats will no longer be on the defensive during the campaign." "said Katsuhiko Nakamura, director of research at the Asian Forum Japan.
"Look at the numbers, CAN is the most likely to take over. But there was so much criticism of the Liberal Democratic Party to change prime ministers without an election, he may decide to go to the polls again very soon."
"It will put a stop to the downward trend in popularity of the Democrats," said Hidenori Suezawa, chief strategist at Nikko Cordial Securities.
"Ozawa must have made this decision to win the election."
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