Chief Cabinet Secretary Yoshimasa Hayashi announced Kishida and his ministers stepped down at a cabinet meeting on Tuesday.
Ishiba was chosen as the governing Liberal Democratic Party's (LDP) leader on Friday to replace Kishida, who announced in August his resignation at the end of his three-year term.
Ishiba is assured to be prime minister later on Tuesday in a vote by parliament because it is dominated by his party's ruling coalition.
The head of Japan's governing party Shigeru Ishiba is set to become the new prime minister. (AP PHOTO)
He is expected to announce his new cabinet later on Tuesday.
On Monday, Ishiba said he planned to call a parliamentary election to be held on October 27 after he is formally chosen as prime minister.
"I believe it is important to have the new administration get the public's judgment as soon as possible," Ishiba said.
Ishiba has proposed an Asian version of the NATO military alliance and more discussion among regional partners about the use of the US nuclear deterrence.
He also suggested a more equal Japan-US security alliance, including joint management of US bases in Japan and having Japanese Self Defence Force bases in the United States.
"The absence of a collective self-defence system like NATO in Asia means that wars are likely to break out because there is no obligation for mutual defence," he wrote in an article to the Hudson Institute last week.
"Under these circumstances, the creation of an Asian version of NATO is essential to deter China by its Western allies."
Ishiba proposes combining of existing security and diplomatic groupings, such as the Quad and other bilateral and multilateral frameworks involving the United States, Australia, New Zealand, South Korea and the Philippines.
He also noted that the Asian version of NATO can also consider sharing of the control of US nuclear weapons in the region as a deterrence against growing threats from China, North Korea and Russia.
Ishiba on Friday stressed Japan needs to reinforce its security, noting recent violations of Japanese airspace by Russian and Chinese warplanes and repeated missile launches by North Korea.
He pledged to continue Kishida's economic policy aimed at pulling Japan out of deflation and achieving real salary increases, while tackling challenges such as Japan's declining birthrate and population and resilience to natural disasters.
Ishiba, first elected to parliament in 1986, has served as defence minister, agriculture minister and in other key cabinet posts, and was LDP secretary general under former prime minister Shinzo Abe.
Kishida took office in 2021 but is leaving so his party can have a fresh leader after his government was dogged by scandals.
19°C