Japan PM hopeful Ishiba says complete exit from deflation is crucial

By Makiko Yamazaki and Yoshifumi Takemoto

TOKYO (Reuters) -Shigeru Ishiba, the former Japanese defence minister running in the ruling party's leadership race, said on Tuesday that a complete exit from deflation is a crucially important task for the country.

"I don't think private consumption has recovered strongly yet despite some signs of improvement," Ishiba said at a press conference where he laid out his policy pledges for the Liberal Democratic Party's (LDP) leadership race.

"I promise to achieve sustainable growth in real wages to realise a full exit from deflation, so that people can spend without worrying about the future," he added.

The LDP's parliamentary control means its leader becomes the prime minister of Japan.

Ishiba's comments are meant to counter speculation that he is more focused on fiscal discipline than economic growth, a ruling party source close to Ishiba's thinking said.

Japan, saddled with the industrial world's heaviest debt at more than twice the size of its economy, has pledged to deliver a primary budget surplus by the next fiscal year.

But calls for more spending are expected to grow as the LDP leadership race is likely to be followed by a snap parliament election.

Another candidate, former economic security minister Takayuki Kobayashi, reiterated in a separate press conference on Tuesday that economic growth should be prioritised over finance.

"I believe we should aim to raise tax revenue by creating a strong economy, which would in turn result in a sustainable finance and social welfare system," Kobayashi said.

He said that he would compile a stimulus package by the end of this year to ease the pain of those affected by inflation, including small- and medium-sized companies, if he were to win the party leadership race.

(Reporting by Makiko Yamazaki and Yoshifumi Takemoto; Editing by Christopher Cushing)