Japan’s economy unexpectedly slipped into recession in the third quarter, setting the stage for Japanese Prime Minister Shinzo Abe to delay an unpopular sales tax hike and call a snap election two years before he has to go to the polls.
The recession comes nearly two years after Abe returned to power promising to revive the economy with “Abenomics,” a mix of massive monetary stimulus, spending and reforms, and is unwelcome news for an already shaky global economy.
Japan’s GDP shrank by an annualized 1.6 percent in the July to September period, after plunging 7.3 percent in the second quarter following a rise in the national sales tax, which clobbered consumer spending.
Photo: Reuters
The world’s third-largest economy had been forecast to rebound by 2.1 percent, but consumption and exports remained weak, saddling companies with huge inventories to work off.
Abe had said he would look at the data when deciding whether to press ahead with a second increase in the sales tax to 10 percent in October next year, as part of a plan to curb Japan’s huge public debt, the worst among advanced nations.
“GDP figures for July-September turned out [to be] not so encouraging,” Abe said at a reception after returning from a week-long overseas tour.
“We are seizing a chance to exit long-lasting deflation and we cannot miss that chance,” he said, adding that he wanted to analyze the situation and then make a decision on the tax.
Media had already said Abe could announce his decision to delay the hike for 18 months as early as today and state his intention to call an election for parliament’s lower house.
Ruling party lawmakers expect the poll to be held on Dec. 14.
An adviser to Abe termed the economic slide “shocking” and urged the government to take steps to support the economy.
“This is absolutely not a situation in which we should be debating an increase in the consumption tax,” said Etsuro Honda, one of the architects of Abe’s reflationary policies.
Japanese Minister of State for Economic Revitalization Akira Amari said some economic stimulus was likely, but added that it would be hard to craft an exceptionally big package because of the need for fiscal discipline.
No election for the lower house need be held until late 2016, but political insiders say Abe wants to lock in his mandate while his ratings are relatively robust.
Next year, he is expected to push ahead with unpopular policies, such as restarting reactors that went off-line after the Fukushima Dai-ichi nuclear power plant crisis and a shift away from Japan’s post-war pacifism.
Facing a divided and weak opposition, Abe’s Liberal Democratic Party is expected to keep its majority in the lower house, but it could lose some seats.
A senior party lawmaker said he expected the prime minister to delay the tax hike and call a snap poll, saying that his “Abenomics” strategy to re-energize the economy was working, but needed more time.
NO-LIMITS PARTNERSHIP: ‘The bottom line’ is that if the US were to have a conflict with China or Russia it would likely open up a second front with the other, a US senator said Beijing and Moscow could cooperate in a conflict over Taiwan, the top US intelligence chief told the US Senate this week. “We see China and Russia, for the first time, exercising together in relation to Taiwan and recognizing that this is a place where China definitely wants Russia to be working with them, and we see no reason why they wouldn’t,” US Director of National Intelligence Avril Haines told a US Senate Committee on Armed Services hearing on Thursday. US Senator Mike Rounds asked Haines about such a potential scenario. He also asked US Defense Intelligence Agency Director Lieutenant General Jeffrey Kruse
STUMPED: KMT and TPP lawmakers approved a resolution to suspend the rate hike, which the government said was unavoidable in view of rising global energy costs The Ministry of Economic Affairs yesterday said it has a mandate to raise electricity prices as planned after the legislature passed a non-binding resolution along partisan lines to freeze rates. Chinese Nationalist Party (KMT) lawmakers proposed the resolution to suspend the price hike, which passed by a 59-50 vote. The Taiwan People’s Party (TPP) voted with the KMT. Legislative Speaker Han Kuo-yu (韓國瑜) of the KMT said the resolution is a mandate for the “immediate suspension of electricity price hikes” and for the Executive Yuan to review its energy policy and propose supplementary measures. A government-organized electricity price evaluation board in March
NOVEL METHODS: The PLA has adopted new approaches and recently conducted three combat readiness drills at night which included aircraft and ships, an official said Taiwan is monitoring China’s People’s Liberation Army (PLA) exercises for changes in their size or pattern as the nation prepares for president-elect William Lai’s (賴清德) inauguration on May 20, National Security Bureau (NSB) Director-General Tsai Ming-yen (蔡明彥) said yesterday. Tsai made the comment at a meeting of the Legislative Yuan’s Foreign Affairs and National Defense Committee, in response to Democratic Progressive Party (DPP) Legislator Wang Ting-yu’s (王定宇) questions. China continues to employ a carrot-and-stick approach, in which it applies pressure with “gray zone” tactics, while attempting to entice Taiwanese with perks, Tsai said. These actions aim to help Beijing look like it has
China is mischaracterizing UN Resolution 2758 for its own interests by conflating it with its “one China” principle, US Deputy Assistant Secretary for China and Taiwan Mark Lambert said on Monday. Speaking at a seminar held by the German Marshall Fund, Lambert called for support for Taiwan’s meaningful participation in the international community at a time when China is increasingly misusing Resolution 2758. The resolution had a clear impact when it changed who occupied the China seat at the UN, Lambert said. “Today, however, the PRC [People’s Republic of China] increasingly mischaracterizes and misuses Resolution 2758 to serve its own interests,” Lambert said. “Beijing