Japan’s prime minister, Fumio Kishida, has said he will not run for the presidency of his ruling Liberal Democratic party [LDP] next month – a decision that will see the appointment of a new leader of the world’s fourth-biggest economy.

Kishida, who has been battling low approval ratings and a damaging funding scandal, said he would step down as LDP leader in September, telling reporters on Wednesday that the party needed an “open contest to promote debate”.

It brings to an end a three-year term marked by scandal, rising living costs and record defence spending.

Kishida’s decision will trigger a contest to replace him as party president, with the winner certain to be approved as prime minister by the LDP-controlled parliament.

His successor will face growing international uncertainty, the election of a new US president and, at home, mounting concern over the cost of living crisis.

Among those named as potential successors are Shigeru Ishiba, a centrist former defence secretary, and Taro Kono, the flamboyant digital minister.

The race for the LDP presidency could also include female candidates, raising the possibility that Japan could have a woman as prime minister for the first time.

The ultra-conservative economic security minister, Sanae Takaichi, and the former internal affairs minister, Seiko Noda, both stood against Kishida in the 2021 party leadership race and could decide to run again, although it is not clear if either will be able to secure the support of at least 20 lawmakers required to enter the race.

The foreign minister, Yoko Kamikawa, has also been mentioned as a potential candidate.

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