Japan's leading PM candidate Koizumi promises snap election

By Kentaro Sugiyama and Leika Kihara

TOKYO (Reuters) -Japan's former environment minister and leading prime ministerial candidate, Shinjiro Koizumi, said on Friday he would call a snap election "at the earliest date possible" if he were to win the ruling party's leadership election this month.

Koizumi also said he would "basically carry over" the economic policies of current Prime Minister Fumio Kishida's administration, if he were to become the country's next leader.

"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 in a news conference announcing his intention to run in the race.

He said that upon becoming prime minister, he would immediately work on a new economic package to aid small firms and low-income households hit by rising living costs.

The 43-year-old son of charismatic former prime minister Junichiro Koizumi, the junior Koizumi is seen as a leading contender in the Sept. 27 race to pick the Liberal Democratic Party's (LDP) new leader, who will become next prime minister due to the party's control of parliament.

He ranked as the most favoured candidate to become the next LDP leader in a poll taken by Nikkei newspaper on Aug. 21-22, followed by former defence minister Shigeru Ishiba.

Koizumi also said he hoped to accelerate Japan's labour market reform, with measures such as obliging companies needing to lay off employees to offer re-skilling opportunities.

The winner of the LDP race will be appointed prime minister at an extraordinary parliament session early in October.

Analysts say the earliest the new premier can dissolve parliament and call a snap election would be mid-October, after delivering a policy speech and taking questions from party leaders in both houses.

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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.

His administration led Japan out of the COVID-19 pandemic with massive fiscal spending and focused on boosting household income by prodding businesses to hike wages.

On monetary policy, Kishida laid the groundwork for the Bank of Japan to phase out its radical monetary stimulus by appointing academic Kazuo Ueda as the bank's governor.

Under Ueda, the BOJ ended negative interest rates in March and raised borrowing costs to 0.25% in July in a landmark shift away from a decade-long, massive stimulus programme.

While Koizumi did not comment on his views on monetary policy, his call for another stimulus package echoed that made by another contender of the LDP race, Toshimitsu Motegi.

However, it was unclear if the time was now right for the BOJ to raise rates, Shigeru Ishiba, another frontrunner in the LDP leadership race, told Reuters on Friday.

In a interview in early August, Ishiba had endorsed the BOJ's policy of gradually raising rates, saying such normalisation could help boost industrial competitiveness.

Ruling party lawmakers traditionally resort to 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.

(Reporting by Kentaro Sugiyama and Leika Kihara; Additional reporting by Makiko Yamazaki and Tim Kelly; Editing by Jamie Freed and Clarence Fernandez)