Japan's Abe to delay sales tax hike until 2019: government source

Sat May 28, 2016 11:14pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Takaya Yamaguchi

TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe plans to delay an increase in sales tax by two and a half years, a government official said on Sunday, as the economy sputters and Abe prepares for a national election.

Abe told Finance Minister Taro Aso and the secretary general of his ruling Liberal Democratic Party, Sadakazu Tanigaki, on Saturday of his plan to propose delaying the tax hike for a second time, until October 2019, said the official, who was briefed on the meeting.

The prime minister, who has promised to announce steps on Tuesday to spur economic growth and promote structural reform, is also expected to order an extra budget to fund stimulus measures, just two months into the fiscal year and on the heels of a supplementary budget to pay for recovery from recent earthquakes in southern Japan.

After chairing a summit of Group of Seven leaders on Friday, Abe said Japan would mobilize "all policy tools" - including the possibility of delaying the tax hike - to avoid what he called an economic crisis on the scale of the global financial crisis that followed the 2008 Lehman Brothers bankruptcy.

"There is a risk of the global economy falling into crisis if appropriate policy responses are not made," Abe told a news conference after the summit. To play its part, Japan "must reignite powerfully the engine of Abenomics," he said, referring to his easy-money policies aimed at getting Japan out of two decades of deflation and fitful growth.

Abe has long said he would proceed with a plan to raise the tax rate to 10 percent from 8 percent next April unless Japan faced a crisis on the magnitude of the Lehman shock.

He said the G7 "shares a strong sense of crisis" about the global outlook, with the most worrisome risk being a global contraction led by a slowdown in emerging economies like China.

Other G7 leaders, however, appeared to differ with Abe on the risk of a global crisis, fuelling comment that Abe was using the G7 to justify delaying the painful tax hike.   Continued...

Japanese Prime Minister Shinzo Abe speaks at a news conference during the G7 Ise-Shima Summit in Shima, Japan, May 27, 2016. REUTERS/Issei Kato