Japan PM contenders clash over spending, taxes

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TOKYO, Sept 8 (Reuters) The frontrunner to become Japan's next leader will pledge tax cuts and bigger government spending to boost the economy, a newspaper said Monday, a contrast with rivals worried about the country's huge debt.brThe winner of the contest to replace outgoing Prime Minister Yasuo Fukuda is widely expected to call a general election, perhaps in November, to take advantage of a hoped-for bounce in popularity and fight off a challenge from a feisty opposition.brIn a manifesto entitled Japan's potential strength -- creating a strong and cheerful Japan, former foreign minister Taro Aso will pledge to stimulate the economy through income tax cuts and regulatory reforms, the Yomiuri newspaper said.brOther candidates set to run in a September 22 race for the leadership of the ruling Liberal Democratic Party are playing down the need for spending and focusing on the need to rein in public debt or proceed with structural economic reforms.brEconomics Minister Kaoru Yosano will pledge in his manifesto Dignified Politics, Agreeable Reforms, to overhaul the tax system, including a rise in the 5 per cent consumption tax, over three years to cover rising social security costs, the Yomiuri said.brWhile few expect a return to the massive spending of the 1990s that left Japan with the highest public debt among advanced nations, the LDP race is offering ruling party members a choice.brYou're talking about sequencing. You're talking about priorities, said Jesper Koll, CEO of investment advisory Tantallon Research Japan.brAso's priority is to counter a cyclical downturn with deficit spending. Yosano's is to reduce the burden on future generations. brFormer Defence Minister Yuriko Koike, who wants to become Japan's first female prime minister, said she wanted to introduce an environment tax, revenues from which could help fund pensions, and improve working conditions for women to help address Japan's falling birth rate and shrinking labour force.brWomen's power helps support Japan, she told reporters. I want to create policies that make better use of that power, enabling them to maintain their private lives and bear and raise children while being part of society, she added.brAnother former defence minister, Shigeru Ishiba, has said he wants to focus on security policy, but also wants to listen to the concerns of those who were suffering economically.brSome economists dismissed the policy gaps as more apparent than real. In a practical sense, how much difference will it make Not much, said Richard Jerram, chief economist at Macquarie Securities (Japan) Limited.brTheir ability to make policy aggressively seems deeply constrained by the political situation, first of all, and in terms of the split in parliament and a lack of unity in the LDP.brThe unpopular Fukuda quit abruptly last week, the second premier to resign in less than a year, in the face of a deadlock where the opposition controls the upper house and can delay laws.brThe new LDP leader is expected to become prime minister because of the party's majority in parliament's lower house.brDespite Aso's apparent lead, some political analysts said his victory was not a done deal.brAso's manifesto will not specify how he might change consumption tax, the Yomiuri said, but he pledged at the weekend not to raise it until the economy improved. brWhoever becomes the next prime minister will square off in the looming general election against Democratic Party leader Ichiro Ozawa, whose third term was confirmed Monday. brOzawa is stressing the need to shrink social gaps, reduce the power of bureaucrats over policy formation, and pay for minimum public pensions with tax revenues. Like Aso, he has come under fire from critics for not addressing Japan's fiscal woes.