By Leika Kihara

TOKYO (Reuters) – Japan’s government and central bank must work closely together to avoid a fall in the yen, Taro Kono, a contender in the ruling party leadership race, said on Thursday.

Kono stated that if market trust in Japan’s finances falls, it could lead to a fall of the yen. In an internet debate between the contenders, Kono stated that if the yen fell further, then import costs will rise which would cause inflation.

Sound macro-prudence must be used to prevent such a thing from happening. Kono is a leading candidate for leadership.

Kono stated that Japan should accelerate deregulation in order to encourage start-ups and attract foreign investment.

“Some regulations are still preventing start-ups from entering markets. I want to get rid of them.” He stated that he would also like to see more foreign investments in Japan via deregulation.

Another candidate, Sanae Takaichi said that if elected prime minister she would create a bold, substantial-sized fiscal stimulus funded through a supplementary budget this year.

Kono and Takaichi will be running in the Liberal Democratic Party’s (LDP) election on Sept. 29. Because the LDP has the majority of seats in the lower house, the winner is likely to be Yoshihide Sug as Japan’s next prime minister.