Photo/Illutration The Liberal Democratic Party headquarters in Tokyo has come under fire over payments to party branches. (Asahi Shimbun file photo)

Japan will likely see another stimulus package under a new prime minister, with several candidates running in the ruling party’s leadership race pledging fresh spending measures to boost growth and cushion the blow to households from rising inflation.

In announcing his intention to run in the race to replace incumbent Prime Minister Fumio Kishida, Chief Cabinet Secretary Yoshimasa Hayashi said on Monday he would prefer boosting spending, rather than cutting taxes, if the economy requires another stimulus package.

Another candidate and minister in charge of economic security, Sanae Takaichi, also called for more fiscal spending to strengthen the economy.

“Strategic deployment of fiscal spending will increase jobs, household income, and improve consumer sentiment. It will also increase tax revenues without raising the tax rate and help build a strong economy,” Takaichi told a press conference on Monday to announce her intention to run in the leadership election.

The remarks followed those by leading candidate, Shinjiro Koizumi, on Friday that he would “immediately” work on a new economic package to aid small firms and low-income households hit by rising living costs.

“I’ll aim to beef up the underlying strength of the Japanese economy so that growth can be attained even in an era where inflation and higher interest rates co-exist,” Koizumi said.

The winner of the Liberal Democratic Party’s (LDP) leadership race, scheduled on Sept. 27, will become next prime minister due to the party’s control of parliament.

Kishida announced last month that he would step down as LDP chief in September, effectively ending a three-year term as leader of the world’s fourth-largest economy.

Kishida’s successor is likely to dissolve parliament next month after being chosen as prime minister in an extraordinary parliament session, and call a snap election, analysts say.

Ruling party lawmakers traditionally make pledges of big spending packages to lure voters when elections near, a trend that led to a ballooning public debt which, at twice the size of Japan’s economy, is the biggest among advanced nations.

The candidates have offered few clues on their views on monetary policy. Hayashi declined to comment, when asked about market expectations that the Bank of Japan (BOJ) is likely to raise interest rates further.

Koizumi did not directly comment on monetary policy but said he would “basically carry over” the economic policies of Kishida’s administration.

An outlier was Takaichi, who said inflation was still too weak when stripping away the effect of one-off factors like fuel and raw material in a sign of her preference for the BOJ to maintain ultra-loose monetary policy.

“Some people say inflation has already hit the BOJ’s 2% inflation target,” said Takaichi, seen as a fan of deceased former prime minister Shinzo Abe’s “Abenomics” stimulus policies. “But inflation is propped up by external factors. We can’t say Japan has stably achieved the BOJ’s price target.”

The BOJ ended negative interest rates in March and raised borrowing costs to 0.25% in July. Governor Kazuo Ueda has signaled the bank’s intention to hike rates further if inflation remains on track to stably hit 2%, as its board now projects.

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