Japan's incoming prime minister, Shigeru Ishiba, announced on Monday that he aimed to call a general election for October 27. 

The snap polls are set to be held a year early and will decide which party controls parliament's lower house. 

"It is important for the new administration to be judged by the people as soon as possible," Ishiba said at a press conference.

The former defense minister narrowly won the race for the leadership of the ruling Liberal Democratic Party (LDP) last week against right-winger Sanae Takaichi. He is set to be formally appointed premier on Tuesday. 

The Japanese yen and government bonds strengthened after Ishiba's victory in the party leadership vote. However, early trading of Japanese shares on Monday showed a fall of more than 4%.

Ishiba's new government

Ishiba on Monday began picking the government and party officials who will contest the election with him.

His close ally Takeshi Iwaya will take over as foreign minister, Gen Nakatani will return to the Defense Ministry and Yoji Muto will handle economy, trade and industry, unnamed sources told Reuters news agency.

Ishiba, 67, has strong backing from several party members. However, he is also known to defy party policy and was a strong critic of former Prime Minister Shinzo Abe who was assassinated in 2022.

The poll ratings for the LDP fell drastically under outgoing Prime Minister Fumio Kishida, due to scandals and rising prices.

Ishiba has promised to restore peoples's confidence in the ruling party. He has pledged to increase defense spending and build stronger ties with the US, against the backdrop of aggression from China and North Korea.

"He seems not so interested in policies to boost economic growth, although what is most important for Japan is low growth rather than fiscal health," Taro Saito, senior economist at NLI Research Institute, told the AFP news agency.

tg/nm (AFP, AP, Reuters)