Abe Tells Officials He Plans to Delay Sales Tax Increase

Japanese Prime Minister Shinzo Abe

Japanese Prime Minister Shinzo Abe.

Photographer: Franck Robichon/pool via EPA
  • Komeito Party Leader Yamaguchi says Abe set on a delay
  • Abe won’t call a general election in July, Nikai says

Japanese Prime Minister Shinzo Abe wants to put off a planned sales tax increase for 2 1/2 years, senior officials from his ruling party and its coalition partner said Monday, as Abe prepares to end the speculation that has swirled for months.

“He told me he wants to delay the sales tax increase by two-and-a-half years,” Natsuo Yamaguchi, head of the junior coalition Komeito Party, told reporters after a meeting with Abe. “I felt he was very determined.” Yamaguchi said he would discuss the matter with his party.

Toshihiro Nikai, chairman of the Liberal Democratic Party’s general council, said after a separate meeting with Abe that he understood the prime minister won’t call a general election to coincide with an upper-house vote in July, as many had speculated.

Abe had repeatedly said he would go ahead with a plan to boost the unpopular consumption tax to 10 percent in April 2017 from the current 8 percent unless there was a crisis on the scale of the Lehman collapse or a major earthquake. Last week, in a presentation to the Group of Seven leaders Abe made the case that the global economy was on the brink of just such a disaster and that urgent measures needed to be taken. He told reporters he would make a final decision on the tax before the upper-house election.

Bulging Debt

A previous increase in the tax to 8 percent in 2014 pushed Japan into a recession, prompting the government to delay the next phase of the hike that had been scheduled for October 2015. Another delay could help bolster Abe’s support before the upper-house election, but would raise fresh questions about how to rein in the world’s biggest debt burden and fund social security in a rapidly aging society.

Almost two thirds of respondents to a poll published by the Nikkei newspaper Monday said they opposed the tax increase. Support for Abe’s cabinet was at 56 percent, up three points on the last survey to the highest level found in the paper’s surveys since September 2014.

Opposition parties are set to submit a no-confidence motion against Abe if the tax is delayed, saying his Abenomics policy program has failed. Since Abe took office in 2012, drastic monetary easing weakened the yen, bolstering exporters’ profits and share prices, until the yen strengthened in 2016. The economy has zigzagged between contraction and growth, consumer spending is weak and inflation data last week showed that prices are falling again.

“A postponement of the planned sales-tax increase will be positive for private consumption in the near term,” said Atsushi Takeda, an economist at Itochu Corp. in Tokyo. “However, in the long run, it may raise concern over the sustainability of Japan’s social welfare system.”

Postponing the sales tax doesn’t necessarily mean the Bank of Japan won’t act at its next meeting in mid-June, Takeda added.

In a further bid to bolster the economy, Abe’s government is set to propose a stimulus package of 5-10 trillion yen in a special legislative session after the July upper-house election, the Nikkei newspaper reported Saturday.

Abe’s plans on the sales tax and the election aren’t backed by all his senior officials. Finance Minister Taro Aso said on Saturday that Abe should call an election in the lower house to coincide with the upper-house vote if the tax increase is to be delayed again, to put the plan to the public, Kyodo News reported. Abe doesn’t need to hold an election in the more powerful lower house until 2018. The LDP’s policy chief Tomomi Inada told Abe Monday he should raise the tax by at least one percentage point next year or hold an election.

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