The 72-year-old leader made the announcement just days after unveiling $18 billion in fresh spending to shore up the flagging economy. Inflation has spiked to its highest in nearly 11 years, hurting consumer spending.

"I felt that we must particularly stress the importance of the economy," Fukuda said in the nationally televised address. "If it will help even a little bit to make the parliamentary session go smoother, I decided that it might be better for someone other than me to be in the lead."

Fukuda, whose father also served as prime minister, has suffered from chronically low approval ratings as he presided over a parliament split between the ruling party and the opposition. One poll published Monday showed his approval rating at 29 percent, down sharply over the past month.