TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe will postpone a planned tax increase and call a general election for December, a newspaper said on Wednesday, in what would be the biggest shift in Abe's economic policies since he came to power two years ago.
Abe said on Tuesday he had not decided on the timing of an election. But the conservative Sankei newspaper said he would delay the increase in the national sales tax by a year and a half to April 2017 and call a snap election for the Lower House of Parliament.
A government official close to the prime minister's office told Reuters on Tuesday that Abe was likely to delay the tax hike, which could derail a promised economic recovery.
Major political parties have already begun gearing up for a possible election.
Opposition politicians say delaying the tax hike would show that the premier's "Abenomics" growth policies have failed.
No election need be called until 2016, but political insiders said Abe, whose support is relatively high but falling, might seek to lock in his mandate before taking unpopular steps next year such as restarting nuclear reactors and passing legislation to allow Japanese troops to fight abroad for the first time since World War Two.
Abe made up his mind to delay the tax increase as third-quarter GDP is likely to be weak, the Sankei said, citing unnamed government and coalition officials. He would then take the issue to voters because the delay would exceed the current Lower House term, said the conservative daily.
The most feasible date for the election would be Dec. 14, said a staff member of Abe's Liberal Democratic Party. That would essentially mark the second anniversary of the 2012 election that brought Abe and the LDP to power and the midpoint of the Lower House term his election ushered in.
Abe raised the tax to 8 percent from 5 percent in April, part of a two-stage plan to rein in huge public debt, sparking Japan's biggest economic contraction since the global financial crisis in the second quarter.
He has said he will decide on whether to proceed with the planned October 2015 increase to 10 percent after seeing third-quarter GDP.
Preliminary GDP numbers are due on Monday. As early as then, Abe would meet with Natsuo Yamaguchi, head of junior coalition party Komeito, to discuss the election schedule, the Sankei said.
Reporting by William Mallard; Additional reporting by Yoshifumi Takemoto; Editing by Dean Yates