Tokyo, June 1 (IANS) Japanese Prime Minister Shinzo Abe on Wednesday said he will delay an already controversial planned tax hike further from April 2017 to October 2019 in a surefire sign that his once-revered “Abenomics” blend of economic policies has failed to breathe life into Japan’s ailing economy.
Abe said the delay was “essential to support not just Japanese growth, but global growth” and that some of his decision making was made following the outcome of the Group of Seven (G7) leaders’ summit he hosted here last week, Xinhua reported.
He said the delay was also necessary to avoid a “substantial drop in domestic demand”, adding the consumption tax hike as he planned “could severely hurt domestic demand”.
As well as delaying the planned tax hike by some two-and-half years, Abe said his government will prepare more fiscal stimulus this fall that could total as much as 6 trillion yen ($54 billion).
Abe initially announced his decision to delay the tax hike to his ruling Liberal Democratic Party (LDP) members at a meeting earlier in the day, saying he had made the decision to again delay the controversial tax hike to 10 percent by two and a half years.
The delay is a blow to Abe as his ascension to office in December 2012 was based predominantly on his “Abenomics” policy mix “miracle cure” that, through aggressive monetary easing and fiscal spending, as well as structural reforms, would rescue Japan from the doldrums of economic stagnation as well as work towards talking the nation’s decades of deflationary pressure alongside the central bank.
Economists have been quick, however, to point out that this has not been the case, and Abe’s announcement this evening is a testament to the failure of his policy mix, with the announcement acting as a double-edge sword.
On the one hand, Abe bought himself more time to get his fiscal house in order, but on the other, in not following through with his planned hike as per his original schedule, has lost public and market faith, which could further impact falling domestic consumption as well as create volatility in both the stock and the currency markets.
In light of this a no-confidence motion was filed against Abe’s cabinet, by four opposition parties a day earlier, although the Japanese lower house on Tuesday shot down the petition.
The parties blasted Abe’s economic and other policies, and took aim at him and his party ahead of the July upper house election.
The opposition parties believe Abe postponing the sales tax hike is a tacit admission that “Abenomics” has utterly failed and, in fact, worsened Japan’s economic situation.
In December 2014, Abe first delayed the tax hike and called a snap election, with observers not ruling out the possibility that a double election could be called in July, although the Japanese leader denied that such an occurrence could happen this summer.