Japanese Prime Minister Fumio Kishida is reportedly set to announce his decision to step down from his role as the leader of the ruling party in September.

What Happened: Kishida, who has been in office for three years, will not seek re-election as the leader of the Liberal Democratic Party, Japanese media, public broadcaster NHK reported on Wednesday.

This decision will prompt a leadership contest within the LDP, which will consequently determine the new leader of the world's fourth-largest economy.

The Prime Minister's tenure has been marked by a series of challenges, including a decline in public support, rising living costs, and political scandals. His successor will inherit these issues, as well as the potential return of Donald Trump as U.S. President next year and escalating geopolitical tensions.

If the report is accurate, Shoki Omori, chief Japan desk strategist at Mizuho Securities in Tokyo, suggests that we can anticipate tighter or neutral, but slightly more restrictive fiscal and monetary conditions depending on the candidate, Reuters reported. "In short, risk-assets, particularly equities, will likely be hit the most," he said.

Following the media report on Kishida's decision to step down, the Nikkei 225 index saw a slight decline, currently trading at 36,196.31, down 0.10%. Meanwhile, the Japanese yen strengthened slightly against the U.S. dollar, with the exchange rate now at 0.0068, up 0.51% today.