The five candidates running in the Liberal Democratic Party presidential race also ran last year for the same post, only this time they’re campaigning to lead a party that’s not quite what it was in September 2024.

The LDP coalition now lacks a majority in either house, and the candidates have started to moderate their economic policies to reflect that reality. On some issues, they're starting to sound a lot like the opposition.

A new LDP leader to replace Prime Minister Shigeru Ishiba will be chosen in a vote on Oct. 4. The victor will almost certainly become the next prime minister.

The five candidates are: Chief Cabinet Secretary Yoshimasa Hayashi, 64; former economic security minister Takayuki Kobayashi, 50; agriculture minister Shinjiro Koizumi, 44; former LDP Secretary-General Toshimitsu Motegi, 69; and former economic security minister Sanae Takaichi, 64.

Koizumi, who is one of the front-runners in polls, has shifted priorities.

Last year, his main agenda item was labor market reform. He advocated for a review of regulations related to layoffs to facilitate the flow of workers to startups and small and midsized firms in the new growth sectors, as Japan’s labor market can be rigid due to traditional lifetime employment and legal hurdles for companies seeking to fire workers.

The move backfired on Koizumi last year, as many thought that he wanted to make it easier for companies to fire employees, which would put job security at risk.

“At this point, I’m not thinking about promoting the review of the layoff regulation,” he said during a news conference on Saturday.

Now, measures to combat inflation are his immediate priority.

To increase incomes, Koizumi said the tax-free income threshold needs to be raised. He also promised to abolish the provisional gasoline tax, which is set at ¥25.1 per liter, as soon as possible.

These policies have been pushed by the Democratic Party for the People, which has made gains in the past two national elections.

Prior to losing its majority in parliament, the LDP was reluctant to implement these policies because it would be difficult to fund them. But the next LDP leader must cooperate with opposition parties to pass legislation.

“What’s different about the LDP presidential race from last year is that the candidates seem to be more willing to incorporate policies proposed by opposition parties to a certain degree, including our party,” said DPP chief Yuichiro Tamaki on Monday.

The scrapping of the provisional gasoline tax has been mentioned by the other four candidates, too, while Motegi and Takaichi have said they will consider increasing the tax-free threshold as well.

Takaichi, who is also seen as a leading candidate and who narrowly lost to Ishiba last year, said she will design a tax credit system combining deductions and cash payments — a policy that has been proposed by the Constitutional Democratic Party of Japan, the largest opposition party.

During the Upper House election in July, the LDP promised a ¥20,000 cash handout to all individuals. All five candidates except for Hayashi said this is no longer a viable option, since the LDP faced big losses in the last election.

Although the candidates have shown more flexibility to work with the opposition parties, they are hesitant in supporting a consumption tax cut.

During the July election, most opposition parties pledged to reduce the consumption tax or simply abolish it, so the new LDP leader might face a call to do the same.

The consumption tax is currently set at 10% for most items and 8% for food and beverages.

The LDP stood firmly against a cut due to concerns over the growing costs of social security, as Japan faces issues related to aging.

“I believe the consumption tax is a crucial source of funding for social security,” Hayashi said last week.

“A ruling party must be responsible for its fiscal policy as well as for the next generation,” Motegi said earlier this month.

Kobayashi and Takaichi said they will not rule out the option.

Takaichi said it would be effective to lower the 8% rate for food and beverages to zero to counter inflation but has come to learn it will take time for retailers to adjust their systems if the rate is cut. Thus, it would not provide an immediate relief from price increases, she said.

Takaichi stressed that the consumption tax cut would still be an effective policy to stimulate consumption and take some pressure off of household finances, so she would keep that as an option and talk to opposition parties about it.

The candidates have also stressed the importance of getting wage increases to outpace inflation, with some presenting specific targets.

Koizumi said he would aim to raise Japan’s average yearly income by ¥1 million by fiscal 2030 — it’s currently less than ¥5 million — while Motegi pledged to increase it by ¥500,000 in three years.

Hayashi said he will basically adopt the economic policy of the Ishiba administration to realize annual real wage growth of 1%. Wages have been falling in real terms in Japan for a number of years.

Takaichi, who is known for her pro-fiscal stimulus stance, has said she will be promoting investment to facilitate growth.

“The global trend is to shift from overly strict fiscal consolidation to responsible and aggressive fiscal policy in which the public and private sectors collaborate to boost investments to solve various social issues,” she said.

Kobayashi said he will make a fundamental review of the income tax to help the middle class and working-age population, starting with the introduction of a fixed-rate cut.