TOKYO: Japan's veteran lawmaker Sanae Takaichi plans to work on a mix of income tax cuts and cash payouts to households, she said in her campaign pledge for the ruling party's leadership race.

Viewed by markets as a fiscal dove, Takaichi said on Thursday (Sep 18) she would run in the Oct 4 race to lead the Liberal Democratic Party and replace outgoing Prime Minister Shigeru Ishiba.

If successful, she could become Japan's first female prime minister.

Takaichi, seen as one of the frontrunners, along with Agriculture Minister Shinjiro Koizumi, would also aim to scrap an extra gasoline tax as early as possible, while expanding grants to local governments, her policy statement showed.

She aims to set up a committee on foreign investment in Japan to boost screening of such investments and consider stronger measures on foreigners buying properties, it showed.

Takaichi, who is set to hold a press conference on Friday to explain her policies, has opposed the Bank of Japan's (BOJ) interest rate hikes and called for increased spending to reflate the fragile economy.

The Nikkei newspaper said Takaichi would also call for gradually lowering the ratio of government debt to gross domestic product.

Her press conference comes just after a two-day meeting of the BOJ that kept interest rates steady at 0.5 per cent, though two board members voted against the move, suggesting the bank could phase out its massive monetary stimulus sooner than expected.

"It seems Takaichi will nod to market concern over Japan's worsening finances," analysts at Mizuho Securities said in a research note, while adding it was also important to watch what she does not say at Friday's event.

"Selling pressure on bonds and yen may subside if her campaign pledge does not include as priority goals plans to abolish the consumption tax for food, maintain monetary easing and pursue weak-yen policies," they said, citing her past goals.

Japan PM contender Takaichi to call for income tax cuts, cash payout