Opposition demands Abe’s resignation over possible tax hike deferral

TOKYO — Opposition parties in Japan yesterday called for Prime Minister Shinzo Abe to resign should he break his promise to implement a 2 per cent consumption tax hike as planned in April 2017 and push it back to October 2019, which an aide to Mr Abe yesterday said was likely to happen because the government needs to give priority to economic recovery.

Main opposition Democratic Party acting secretary-general Tetsuro Fukuyama said in an NHK television programme that if Mr Abe delays the tax hike, it means his economic policies have failed and he and his Cabinet members should resign to take responsibility. Japanese Communist Party and Social Democratic Party officials backed the demand.

In the same NHK programme, acting secretary-general of the ruling Liberal Democratic Party (LDP) Yasufumi Tanahashi asked for public understanding over the likely decision to postpone. “It is a matter of course that (Abe) will deal with the situation flexibly under the circumstances that tax revenues are unlikely to increase in the mid- and long-terms,” he said.

In another news programme aired by Fuji television yesterday, Mr Hakubun Shimomura, an aide to Mr Abe, said: “We have no other options but to postpone the sales tax increase. If the increase means a decline in tax revenue for the government, that would threaten the achievement of the goals under Abenomics.”

The plan to shelve the tax hike comes as the Japanese economy experiences sluggish growth due to tepid domestic private consumption and a slowdown in emerging economies, especially China. Consumer spending in Japan plunged following the previous consumption tax increase in April 2014.

The tax hike is a key measure which would help pay down one of the biggest debt loads among rich nations but may also undermine Japan’s frail economic recovery.

Yesterday, Japanese Finance Minister Taro Aso said the lower house of Parliament should be dissolved followed by a general election if the increase in the consumption tax is delayed. “Unless a lower house election is held to seek (the) voters’ verdict, it would not make sense,” Mr Aso told an LDP meeting in Toyama yesterday.

Mr Abe had brought up the postponement proposal on Saturday evening during talks with Mr Aso, Chief Cabinet Secretary Yoshihide Suga and LDP secretary-general Sadakazu Tanigaki. The four men failed to reach an agreement and decided to continue further discussions, according to sources close to the matter.

Mr Aso and Mr Tanigaki had told Mr Abe he would need to call a general election of the House of Representatives at the same time as the July upper house election if he postpones the hike, said the sources. But the Prime Minister did not make it clear whether he supported the idea.

Mr Tetsuo Saito, acting secretary-general of LDP coalition ally Komeito, said yesterday his party has been left out of discussions and that he has heard “nothing” about the postponement. He said he will decide on a response after discussions with the LDP.

Mr Abe said at a Friday press conference after the Group of Seven summit meeting in central Japan that he would make a decision on whether to postpone the increase before the upper house election in July, stressing current risks in the global economy. If it transpires, it will be the second time Mr Abe has decided to delay a consumption tax hike. Following a rise of three percentage points to 8 per cent implemented in April 2014, the second tax increase to 10 per cent was originally planned for October 2015, but Mr Abe announced a deferment in November 2014.

Since that first postponement, Mr Abe has repeatedly said he would go ahead with the tax increase in April 2017 unless there was a major global economic shock or another earthquake equivalent to the one that devastated north-eastern Japan in March 2011.

A two-stage tax increase schedule was originally laid out in a 2012 accord between the LDP, Komeito and now-defunct Democratic Party of Japan, currently known as the Democratic Party. Tokyo’s last sales tax rise in April 2014 — the nation’s first in 17 years — was blamed for stalling a nascent economic recovery and pushing Japan into a recession from which it has barely recovered.

Japanese government coffers are deep in the red, with public debt standing at twice the size of the economy — the worst among industrialised nations. AGENCIES