TOKYO - The front runner in a race to be Japan's next prime minister will pledge tax cuts and increased government spending to try to boost the economy over the next three years, a newspaper reported on Monday.

Outspoken former foreign minister Taro Aso is seeking the leadership to replace Mr Yasuo Fukuda, who stepped down suddenly a week ago.

With Japan facing a likely recession, rivals for the job of prime minister are divided over ways to boost a slowing economy while coping with inflation at a decade high, with the government constrained by sky-high public debt.

In a manifesto entitled 'Japan's potential strength - Creating a strong and cheerful Japan', Mr Aso said he would boost the economy through tax cuts and regulatory reforms, the Yomiuri newspaper said.

Mr Aso has previously urged expanded tax breaks for stock investments.

Other candidates for the leadership have played down the prospect of Japan spending its way out of recession.

A rival candidate, Economics Minister Kaoru Yosano, would pledge in his manifesto to raise consumption tax from a current level of 5 per cent over the next three years to help cover rising social security costs, the Yomiuri said.

Tax is shaping up as a key issue in the leadership vote in the ruling Liberal Democratic Party (LDP), due on Sept 22.

The winner is expected to become prime minister because of the LDP's domination of the lower house of parliament.

Mr Aso's manifesto did 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.

'Raising the tax amid the sluggish economy could accelerate the worsening of the economy,' he said in a speech in Fukuoka prefecture, southwest Japan.

'We should think about the consumption tax only after the people and corporate managers think the economy has recovered,' he added.

Mr Aso also stressed the necessity of public works, Kyodo news agency said. -- REUTERS