Embattled Japanese Prime Minister Shigeru Ishiba will step down to avoid a split within his ruling Liberal Democratic Party (LDP), a source close to the premier told Reuters on Sunday.
A spokesperson for the Prime Minister's Office did not immediately have a comment when contacted by Reuters, but the government said Ishiba would hold a press conference at 6pm (0900 GMT).
Since taking office in September last year, former defence minister Ishiba saw his coalition lose its majority in both houses of parliament, amid public discontent over rising living costs.
Despite growing pressure from within the LDP, which has ruled Japan for almost all of the post-war era, to take responsibility for the party's defeat in the upper house elections in July, Ishiba had turned down calls to step down.
Instead, he focused on trying to straighten out the final details of a deal with the United States on trade tariffs that have disrupted its critical automotive industry.
However, speculation over Ishiba's future intensified after the LDP scheduled a vote for Monday to decide whether to hold an extraordinary leadership election.
Markets are now counting on the chance of Ishiba being replaced by an advocate of looser fiscal and monetary policy, such as Sanae Takaichi, who has criticised the Bank of Japan's interest rate hikes.
Takaichi narrowly lost to Ishiba in last year's LDP leadership run-off.
Shinjiro Koizumi, the telegenic political scion who has gained prominence as Ishiba's farm minister tasked with trying to cap soaring prices, is another possible successor.
"Given the political pressure mounting on Ishiba after the LDP's repeated election losses, his resignation was inevitable," said Kazutaka Maeda, economist at Meiji Yasuda Research Institute.
"As for potential successors, Koizumi and Takaichi are seen as the most likely candidates. While Koizumi is not expected to bring major changes, Takaichi's stance on expansionary fiscal policy and her cautious approach to interest rate hikes could draw scrutiny from financial markets," Maeda added.
If Ishiba resigns, his last act as premier will have been to finalise details of a trade deal with the United States last week, under which Japan pledged $550 billion of investments in exchange for lower tariffs from US President Donald Trump on Japan's key autos sector.
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