Written by Joyce Nzomo
Japanese Agriculture Minister Shinjiro Koizumi, son of former Prime Minister Junichiro Koizumi, has formally entered the race to become the next leader of the Liberal Democratic Party (LDP), pledging to prioritise wage growth and productivity in order to counter inflation.
At a press conference in Tokyo on Saturday, Koizumi said Japan must pivot from decades of policies designed to fight deflation to strategies more suited to an era of rising prices. “Japan’s economy is in a transition phase from deflation to inflation,” he told reporters. “We must have wage growth accelerate at a pace exceeding inflation, so consumption becomes a driver of growth.”
Koizumi, considered one of the frontrunners in the leadership contest, promised that if elected he would immediately compile a package of measures to cushion the impact of rising prices and submit a supplementary budget to an extraordinary parliamentary session.
He said his administration would cut the gasoline tax, expand household tax exemptions, raise average wages by 1 million yen ($6,800) by fiscal 2030, and boost corporate capital expenditure to strengthen Japan’s manufacturing base. “While being mindful of the need for fiscal discipline, we can use increased tax revenues from inflation to fund policies for achieving economic growth,” he said.
On monetary policy, Koizumi emphasised the importance of close coordination between the government and the Bank of Japan (BOJ) to secure both stable prices and sustainable growth.
His stance comes as the BOJ considers further interest rate hikes, which remain low by global standards. Rival candidate Sanae Takaichi, a veteran fiscal dove, has in the past criticized rate hikes but avoided discussing monetary policy during her own campaign launch on Friday.
The LDP leadership election, set for October 4, was triggered by Prime Minister Shigeru Ishiba’s decision earlier this month to step down. Koizumi and Takaichi are seen as the leading contenders, though other figures such as Chief Cabinet Secretary Yoshimasa Hayashi have also entered the race.
while the LDP remains the largest party in the lower house of parliament, it lost its majority in both houses under Ishiba, meaning the new leader’s path to becoming prime minister is strong but not guaranteed.
The race has already attracted strong attention from markets, with Koizumi’s pro-growth agenda seen as potentially boosting fiscal spending. Expectations have contributed to a recent rise in yields on super-long government bonds. “We need to build a strong economy backed by growth in both demand and supply,” Koizumi said, underscoring his case for structural reforms alongside fiscal and monetary support.
Courtesy of Reuters
