TOKYO - Japan's veteran lawmaker Sanae Takaichi will propose a mix of income tax cuts and cash payouts to households in her campaign pledge for the ruling party's leadership race, the Nikkei newspaper reported on Friday.

In the pledge, Takaichi will also call for gradually lowering the ratio of government debt to gross domestic product, the Nikkei reported.

Seen by markets as a fiscal dove, Takaichi said on Thursday she would run in the ruling Liberal Democratic Party leadership race on Oct 4 to replace outgoing Prime Minister Shigeru Ishiba.

Takaichi, who hopes to become Japan's first female prime minister, is seen as one of the frontrunners, along with Agriculture, Forestry and Fisheries Minister Shinjiro Koizumi.

Takaichi said she would hold a press conference on Friday to explain her policies. She has opposed the Bank of Japan's interest rate hikes and has called for increased spending to reflate the fragile economy.

Her news conference will come on the day the BOJ concludes a two-day meeting, where the board is widely expected to keep interest rates steady at 0.5 percent but signal its readiness to keep raising still-low borrowing costs.

"It seems Takaichi will nod to market concern over Japan's worsening finances. What's also important is what she won't say" in the news conference, analysts at Mizuho Securities said in a research note.

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"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 - all something she has mentioned in the past," they said.