Japan Leadership Candidates Back Wage Growth, Differ on Strategies for Household Support

As Japan's leadership candidates vie for the prime minister position, all contenders agree on continuing wage growth but differ on how to best support households amid rising prices. Some advocate for cash handouts, while others push for targeted subsidies to manage economic challenges.

Japan's Leadership Candidates Agree on Wage Growth but Clash Over Economic Support Amid Rising Prices

Contenders for the leadership of Japan's ruling party, competing to become the next prime minister, emphasized the necessity of continuing the wage growth trajectory established under the previous prime minister, Fumio Kishida. However, they disagreed on how to provide support to households and the broader economy in the face of increasing prices.

According to Japan Today, Shinjiro Koizumi, a rising figure in the Liberal Democratic Party and one of the public favorites to succeed Kishida, announced that he would provide cash handouts to low-income households and pensioners to increase his support.

Although Kishida's government has provided financial assistance to households to reduce utility bills, other candidates, such as former economic security minister Takayuki Kobayashi, who was previously a Finance Ministry official, and Digital Minister Taro Kono, have stated that support in the form of subsidies should be "targeted."

A record nine candidates are vying for the position of leader of the ruling party, which has been impacted by a slush funds scandal, in the LDP leadership election on September 27. Some of the most significant concerns are the need to revitalize the party, resolve security and demographic challenges, and strengthen the economy.

The LDP and its junior coalition partner, the Komeito party, control both chambers of parliament, ensuring that the next president becomes the prime minister. A key issue is the timing of the emergency election, which the new leader will call.

"What we are seeing is the economy finally transitioning to a growth-oriented one from deflation. We need to accelerate the progress rather than moving backward," Koizumi said at a joint press conference with the other eight contenders at the LDP headquarters.

At the same event, Kono said, "We need to stop the practice of giving subsidies to everything," emphasizing the need to examine the effectiveness of recent budgeting.

This is the most favorable result in three decades of annual compensation negotiations between management and labor in Japan. Even after inflationary pressures are considered, wage growth has experienced an upward trend in recent months.

It is widely believed that the Japanese government is on the brink of officially declaring the end of deflation. However, consumers have been significantly affected by the increasing prices of various products, primarily attributable to the increased costs of imports.

Japan's LDP Leadership Contenders Debate Tax Increases and Economic Growth Amid Defense Spending Surge

Shigeru Ishiba, a former Defense Minister currently in his fifth bid to become the head of the LDP, is another contender who has stated that if elected president, he will endeavor to revitalize regional economies. He further noted that the economy should expand by reducing regional and income disparities.

Chief Cabinet Secretary Yoshimasa Hayashi, a close ally of Kishida, and other candidates generally concur that Kishida's economic policies should be maintained. However, a significant point of disagreement is the timing and extent of tax increases to finance a substantial increase in defense expenditure.

In contrast to the government's strategy, Toshimitsu Motegi, the second-ranking member of the LDP, reiterated that he would not implement tax increases. His stance unveiled just before official campaigning on September 12, sent shockwaves through the LDP and beyond.

Sanae Takaichi, the economic security minister in Kishida's Cabinet, also took a cautious stance. "When is the next tax increase going to be? This mindset needs to change. Economic growth comes first and foremost," she said.

Japan intends to increase defense expenditures by 43 trillion yen ($305 billion) over five years until fiscal 2027. The government has already resolved to finance a portion of the total by increasing taxes, although the precise timing has yet to be established.

Japan's fiscal condition is the worst among developed nations. However, the COVID-19 pandemic, the cost-of-living crisis resulting from Russia's conflict in Ukraine, and the yen's depreciation to record lows have increased fiscal spending to alleviate households' suffering.

Among other candidates, former health minister Katsunobu Kato, who has promised to "double people's incomes," said fiscal restoration does not always need to come first and that now is the time to focus on economic growth.

Yoko Kamikawa, who has served as foreign minister under Kishida, said she will ensure that economic growth benefits can be distributed more widely to people, a goal set by the premier under his push for a "new version of capitalism."