Abe Likely to Postpone Japan’s Sales Tax Hike till October 2019

Japan’s Prime Minister Shinzo Abe announced a possible decision change regarding an increased sales tax at a meeting with his ruling Liberal Democratic Party Saturday. He discussed the strong probability of postponing the tax increase by two and a half years to October 2019 citing the government’s need to give priority to economic recovery by taking measure to avoid what he called an ‘economic crisis on the scale of the global financial crisis that followed the 2008 Lehman Brothers bankruptcy.’

At the Group of Seven (G-7) summit which ended Friday, Abe told world policy makers that the global economy faced its toughest year since 2008, pointing to recent data that showed commodities prices had plummeted 55 percent since 2014 and justifying his decision to postpone the Japanese sales tax hike.

The increased tax is part of Abe's plan to scale down the nation's swelling debt, currently equal to more than 200 percent of gross domestic product (GDP). The first move came in April 2013, when the sales tax was increased from 5 percent to 8 percent which subsequently plunged the economy into a short term recession as household spending slumped.

Global Economic Crisis Possible

At the G7 meeting, Abe had insisted he would implement the increase in April 2017 despite fears it would tip the struggling economy into recession again. Over the weekend, he changed his mind, saying there was a risk of the global economy falling into crisis if appropriate policy responses weren't made.

According to Yasufumi Tanahashi, acting secretary-general of the ruling Liberal Democratic Party, "Japan is in economic conditions that require a delay to the sales-tax increase. 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.

Abe announced on Friday that he would make a decision regarding the tax before July's Upper House election.

Cina Coren
Cina Coren is a former Wall Street broker and financial advisor. She holds a Master's degree in Communications and spent many years writing for international news outlets and journalistic publications. Today, Cina spends most of her time writing internet articles and blogs, and reading various newspapers to stay on top of the news.