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Japan's Abe suggests higher chance of tax hike delay
March 9, 2016 / 4:17 AM / 2 years ago

Japan's Abe suggests higher chance of tax hike delay

TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe said on Wednesday that whether to proceed with a sales tax hike next April would be a “political decision,” suggesting that the chance of delaying it may have increased given overseas headwinds hurting the economy.

Japan's Prime Minister Shinzo Abe speaks to reporters at Abe's official residence in Tokyo, Japan, January 28, 2016. REUTERS/Yuya Shino

Abe has already delayed the tax increase once, and has long said he would only delay it again if Japan were to suffer a shock on the magnitude of the 2008 collapse of U.S. investment bank Lehman Brothers.

More recently, though, he said a global economic contraction could also force a rethink and that it would be meaningless to press ahead if it crimped tax revenue by choking the economy.

Speaking in parliament, Abe reiterated that the government still planned to raise the tax to 10 percent from the current 8 percent early next year unless a global economic contraction or a Lehman-style market shock jolt Japan’s economy.

When asked what could be defined as a “global economic contraction” that would justify delaying the tax hike, Abe said: “That would be a political decision, taking into account analyses based on various perspectives from experts.”

Abe raised the sales tax in 2014 to 8 percent from 5 percent, tipping Japan into recession. He delayed the second stage of the planned increase to 10 percent, initially to have been last October, by a year and a half.

In public, Abe insists that the tax will rise in 2017 to deal with Japan’s enormous national debt.

But the government has begun informally discussing a second delay to the tax hike as consumption slumps on slow wage growth and Abe prepares for elections this summer.

Abe’s administration will hold a series of meetings inviting academics, including Columbia University Professor Joseph Stiglitz, from next week to discuss the global economy. The first such gathering will be held on March 16.

Some analysts say the meetings could be used to lay the ground to delay the tax hike by emphasizing the damage the global economic slowdown could inflict on Japan’s economy, which may already be on the brink of another recession.

Reporting by Leika Kihara and Kaori Kaneko; Editing by Kim Coghill

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