Japan PM hopeful Ishiba emphasizes the importance of fully exiting deflation, reports Reuters.

By Makiko Yamazaki and Yoshifumi Takemoto

TOKYO (Reuters) – Shigeru Ishiba, a former Japanese defense minister, emphasized the importance of fully exiting deflation during a press conference on Tuesday, as he campaigns for leadership of the ruling Liberal Democratic Party (LDP).

Ishiba remarked, "I don’t think private consumption has recovered strongly yet, despite some signs of improvement." He outlined his policy commitments, stating, "I promise to achieve sustainable growth in real wages to realize a full exit from deflation, so that people can spend without worrying about the future."

Given the LDP’s parliamentary control, its leader effectively becomes Japan’s prime minister. Ishiba’s statements aim to dispel concerns that his focus lies more on fiscal discipline than on boosting economic growth, according to a source familiar with his perspective.

Japan, which has the largest debt in the industrialized world—exceeding twice the size of its economy—has committed to achieving a primary budget surplus by the next fiscal year. However, increasing calls for additional spending are anticipated as the LDP leadership contest might lead to a snap parliamentary election.

Another candidate, former economic security minister Takayuki Kobayashi, echoed Ishiba’s sentiment in a separate press conference, asserting that economic growth should take precedence over financial constraints. He stated, "I believe we should aim to raise tax revenue by creating a strong economy, which would in turn result in sustainable finance and a social welfare system."

Kobayashi also pledged to develop a stimulus package by the end of this year aimed at alleviating the financial strain on those impacted by inflation, including small- and medium-sized enterprises, should he secure the party leadership.