Abe to call for snap election
JAPANESE Prime Minister Shinzo Abe says he will call an early election to seek a fresh mandate for his economic policies, and postpone an unpopular sales tax hike, a day after data showed the economy had slipped back into recession.
The world's third-biggest economy unexpectedly shrank for a second consecutive quarter in July-September, a sign that the pain from an initial rise in the sales tax to 8 per cent from 5 per cent in April was lasting longer than expected.
Yesterday, Mr Abe said he would delay a second tax increase for 18 months. The increase to 10 per cent had been scheduled for next October.
He added that he would dissolve the Lower House of Parliament on Friday for an election that must be held within 40 days. The vote is expected to be held on Dec 14.
Mr Abe - who returned to power in December 2012, pledging to revive growth with a radical mix of hyper-easy monetary policy, spending and reform - insisted that his policies were working and challenged the opposition to come up with an alternative.
"I am aware that critics say 'Abenomics' is a failure and not working, but I have not heard one concrete idea what to do instead...Are our economic policies mistaken or correct? Is there another option?" he asked at a televised news conference. "This is the only way to end deflation and revive the economy."
However, he vowed that the sales tax rise, needed to fund swelling social security costs and curb Japan's massive public debt, would be implemented without fail in April 2017.
Mr Abe is seeking to renew his mandate just as doubts about the success of his strategy are deepening.
The Parliament's Lower House is not due for an election until late 2016. But the Premier is hoping to cement his grip on power before his support ratings, now below 50 per cent in some surveys but still sturdy by Japanese standards, slip further.
Critics say that Abenomics has benefited big companies and affluent city dwellers by weakening the yen and boosting the stock market, but that ordinary Japanese have been hurt because inflation has outpaced wage increases.
Mr Abe told reporters earlier, after meeting his economic advisers, that consumption was stalling despite other positive signs and that he would prepare stimulus steps, especially for smaller firms and regions.
Media reports said the package could be worth up to 3 trillion yen (S$33.5 billion).