Photo/Illutration Shinjiro Koizumi announces his bid to run in the ruling Liberal Democratic Party leadership race on Sept. 20. (Reuters)

Shinjiro Koizumi, launching his bid to become Japan’s next prime minister, pledged Sept. 20 to focus on revitalizing the economy by boosting wages and productivity to counter rising prices.

Koizumi, seen as a frontrunner in the ruling party’s leadership race, said Japan must shift the focus of economic policy from beating deflation to one better suited to an era of inflation.

“Japan’s economy is in a transition phase from deflation to inflation,” Koizumi told a news conference announcing his bid for president of the Liberal Democratic Party.

“We must have wage growth accelerate at a pace exceeding inflation, so consumption becomes a driver of growth,” Koizumi said, adding that the economy would be his policy priority.

On monetary policy, Koizumi said he hoped the Bank of Japan would work in lock step with the government to achieve stable prices and solid economic growth.

Koizumi and veteran fiscal dove Sanae Takaichi are seen as the top contenders in the Oct. 4 party race after Prime Minister Shigeru Ishiba’s decision this month to step down.

The next LDP leader is likely to become prime minister as the party is by far the largest in the Lower House, although the LDP lost its majorities in both chambers under Ishiba, so the path is not guaranteed.

Koizumi said if he were to become prime minister, his government would immediately compile a package of measures to cushion the economic blow from rising prices, and submit a supplementary budget to an extraordinary parliament session.

“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.

If chosen as prime minister, Koizumi said his government would slash tax on gasoline, increase tax exemptions for households and take steps to raise average wages by 1 million yen ($6,800) by fiscal 2030.

He also pledged to increase government support on corporate capital expenditure to bolster the nation’s manufacturing capacity. “We need to build a strong economy backed by growth in both demand and supply,” Koizumi said.

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