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Japan calls snap election Japan calls snap election
(35 minutes later)
Japan’s prime minister, Shinzo Abe, has called a snap election for next month in a bold attempt to shore up support for his decision to postpone an unpopular tax rise and breathe life into his “Abenomics” growth strategy. Japan’s prime minister has called a snap election for next month in a bold attempt to shore up support for his decision to postpone an unpopular tax rise and breathe life into his “Abenomics” growth strategy.
Abe told a televised news conference on Tuesday that he would dissolve the lower house of parliament on Friday to pave the way for an election on 14 December. Shinzo Abe told a televised news conference on Tuesday that he would dissolve the lower house of parliament on Friday to pave the way for an election on 14 December. He added that he would delay a rise in the consumption [sales] tax, from 8% to 10%, until April 2017, 18 months later than planned.
He added that he would put off a rise in the consumption [sales] tax, from 8% to 10%, until April 2017, 18 months later than planned.
Abe’s move came a day after quarterly GDP figures showed Japan had slipped back into recession for the first time since 2012. The economy shrank by an annualised 1.6% in July to September after plunging 7.3% in the second quarter.Abe’s move came a day after quarterly GDP figures showed Japan had slipped back into recession for the first time since 2012. The economy shrank by an annualised 1.6% in July to September after plunging 7.3% in the second quarter.
A rise in the same tax this April – the first in 17 years – from 5% to 8%, has been widely blamed for hammering consumer spending, the driver of 60% of the world’s third-biggest economy.A rise in the same tax this April – the first in 17 years – from 5% to 8%, has been widely blamed for hammering consumer spending, the driver of 60% of the world’s third-biggest economy.
“I’ve listened to lots of opinions … and taking those into account, and to ensure that Abenomics will succeed, I decided today to postpone the consumption tax hike by 18 months to April 2017,” Abe said.“I’ve listened to lots of opinions … and taking those into account, and to ensure that Abenomics will succeed, I decided today to postpone the consumption tax hike by 18 months to April 2017,” Abe said.
He added that the “three arrows” of Abenomics were having the desired effect, citing rises in employment and corporate revenues. But he said that wages and consumption – two key indicators that have largely remained flat – “should” increase in time. He added that the “three arrows” of Abenomics were having the desired effect, citing rises in employment and corporate revenues. But he said wages and consumption, two key indicators that have largely remained flat, “should” increase in time.
Abe said Monday’s GDP figures meant a 3% rise in the sales tax next October would weigh heavily on consumer spending and jeopardise attempts to stave off deflation.Abe said Monday’s GDP figures meant a 3% rise in the sales tax next October would weigh heavily on consumer spending and jeopardise attempts to stave off deflation.
The GDP data were an unexpected setback for Abe’s three-pronged economic programme, which combines massive government spending with cheap credit and structural reforms. In echoes of former UK prime minister Margaret Thatcher, his political hero, Abe said there was “no alternative” to his growth-led strategy. The GDP data was an unexpected setback for Abe’s three-pronged economic programme, which combines massive government spending with cheap credit and structural reforms. In echoes of the former UK prime minister Lady Thatcher, his political hero, Abe said there was “no alternative” to his growth-led strategy.
Many analysts had predicted the economy would grow by just over 2% between July and September; economists still believe there will be a rebound, but that it won’t come until early next year. Many analysts had predicted the economy would grow by just over 2% between July and September; economists still believe there will be a rebound, but that it was unlikely to come until early next year.
Asked why he had decided to call an election just two years into his four-year term, Abe said: “I have had to make a critical decision so I feel I must seek an immediate mandate from the public. I will ask voters to deliver their judgment.”Asked why he had decided to call an election just two years into his four-year term, Abe said: “I have had to make a critical decision so I feel I must seek an immediate mandate from the public. I will ask voters to deliver their judgment.”
Abe had agreed to a two-stage increase in the VAT-like tax while in opposition to address growing concern over Japan’s public debt, the largest among developed nations. Some of the extra revenue the tax rise would create is desperately needed to pay soaring health and social security costs created by the country’s rapidly greying population.Abe had agreed to a two-stage increase in the VAT-like tax while in opposition to address growing concern over Japan’s public debt, the largest among developed nations. Some of the extra revenue the tax rise would create is desperately needed to pay soaring health and social security costs created by the country’s rapidly greying population.
By putting off a second tax increase – from 8% to 10% – scheduled for October 2015, Abe has defied fiscal hawks in his ruling Liberal Democratic party [LDP]. By putting off a second tax increase – from 8% to 10% – scheduled for October 2015, Abe has defied fiscal hawks in his ruling Liberal Democratic party (LDP).
Confronted with Monday’s bleak GDP data, Abe said he had opted instead to concentrate on boosting growth and beating deflation after more than two decades of stagnation and low spending. Confronted with the bleak GDP data, Abe said he had opted instead to concentrate on boosting growth and beating deflation after more than two decades of stagnation and low spending.
To underline his priorities – and as a sweetener for voters – he is also poised to unveil a fresh stimulus package, reportedly worth 2tn to 3tn yen. To underline his priorities, and as a sweetener for voters, he is also poised to announce a fresh stimulus package, reportedly worth ¥2tn to ¥3tn.
“The GDP figures for July to September turned out to be not so encouraging,” Abe said. “We are seizing a chance to exit long-lasting deflation and we cannot miss that chance. We will stay the course in restoring our fiscal health and regain the trust of the international community.”“The GDP figures for July to September turned out to be not so encouraging,” Abe said. “We are seizing a chance to exit long-lasting deflation and we cannot miss that chance. We will stay the course in restoring our fiscal health and regain the trust of the international community.”
He denied speculation that the tax rise would be postponed a second time. “We will continue to move the economy forward to give us the right environment to go ahead with the sales tax rise,” he said.He denied speculation that the tax rise would be postponed a second time. “We will continue to move the economy forward to give us the right environment to go ahead with the sales tax rise,” he said.
While Abe is certain to find support for the tax delay among cash-strapped voters, he has yet to convince fiscal hawks in his own party that Japan’s debt crisis can be set aside. While Abe is certain to find support for the tax delay among cash-strapped voters, he has yet to convince fiscal hawks in his party that Japan’s debt crisis can be set aside.
Anything other than a resounding victory could encourage those seeking to replace him when the LDP holds regular leadership elections next September, said Tobias Harris, a Japan analyst at Teneo Intelligence. Anything other than a resounding victory could encourage those seeking to replace him when the LDP holds regular leadership elections next September, said Tobias Harris, a Japan analyst at Teneo Intelligence. “While Abe will win support for his decision to postpone the second tax hike, he will have to answer for the recession that has now occurred under his watch as well as for the broader failures of Abenomics to raise household incomes,” he said.
“While Abe will win support for his decision to postpone the second tax hike, he will have to answer for the recession that has now occurred under his watch as well as for the broader failures of Abenomics to raise household incomes,” Harris said.
“Anything more than a marginal reduction in the coalition’s seat share will be a personal defeat for Abe – even more so if the ruling coalition loses enough seats to be deprived of its super-majority.”“Anything more than a marginal reduction in the coalition’s seat share will be a personal defeat for Abe – even more so if the ruling coalition loses enough seats to be deprived of its super-majority.”
Harris added that any significant reduction in seats could undermine Abe’s premiership and raise the likelihood that he would face a challenger in the LDP’s leadership election.Harris added that any significant reduction in seats could undermine Abe’s premiership and raise the likelihood that he would face a challenger in the LDP’s leadership election.