Japan will probably delay a sales tax increase scheduled for April next year for two-and-a-half years because the government needs to give priority to economic recovery, Hakubun Shimomura, an aide to Japanese Prime Minister Shinzo Abe, said yesterday.
“We have no other options but to postpone the sales tax increase,” Shimomura said in a news program broadcast by Fuji television. “If the increase means a decline in tax revenue for the government, that would threaten the achievement of the goals under ‘Abenomics.’”
Abe has said he plans to make a decision before an upper-house election this summer on whether to go ahead with a planned increase in the levy in April next year to 10 percent, from 8 percent at present.
He had previously said the matter would be decided at an appropriate time and that it would be postponed only if there was a shock on the scale of a major earthquake or a corporate collapse such as that of Lehman Brothers Holdings Inc.
An increase in the levy in 2014 pushed Japan into a recession.
The prime minister on Saturday told Japanese Minister of Finance Taro Aso and Liberal Democratic Party (LDP) Secretary-General Sadakazu Tanigaki to delay the sales tax increase to October 2019, NHK reported.
Aso advised the prime minister to be cautious about the idea, NHK said.
“Japan is in economic conditions that require a delay to the sales-tax increase,” LDP Representative Yasufumi Tanahashi yesterday said in a news program aired by public broadcaster NHK, adding that it is natural for Japan to take proactive measures as risks to global economies are increasing.
A slowdown in the Chinese economy and weaker equities markets are also having negative effects on Japanese consumer spending, Tanahashi said
If Abe fails to go ahead with his plan of raising the tax, it means his economic policies have failed and he and his Cabinet members should resign to take responsibility, opposition Democratic Party of Japan Deputy Secretary-General Tetsuro Fukuyama said in the NHK program.
Abe said at a G7 leaders meeting last week that the global economy faces significant risks of another crisis. While the Japanese leader failed in a bid to have the G7 include his warning in a communique issued on Friday, he referenced the “Lehman shock” repeatedly in a press conference and said the world economy is threatened by a prolonged slowdown in demand.
Since Japan’s previous tax increase in 2014, the economy has moved back and forth between contraction and growth. Consumer spending remains weak and inflation data released on Friday shows that prices are falling again.
If delayed, it would be Abe’s second postponement as the tax was initially scheduled to be raised in October last year.
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