TOKYO • Finance Minister Taro Aso reversed course yesterday, joining the ranks of lawmakers calling for a delay in a planned increase in Japan's sales tax.
The about-face is a blow to officials at the finance ministry, who are among the strongest advocates for raising the levy to help contain Japan's debt burden.
Mr Aso had told his United States counterpart at a Group of Seven nations meeting as recently as May 21 that the tax hike would proceed as scheduled in April 2017, barring an economic shock on the level of the Lehman Brothers collapse or the 2011 earthquake in northern Japan.
"For Japan, the biggest problem is that private consumption hasn't risen," Mr Aso told reporters in Tokyo yesterday. "That's 60 per cent of GDP that isn't increasing, and so to deal with that, now isn't the time to raise the sales tax again."
The ruling party and its ally Komeito approved the delay yesterday, Liberal Democratic Party secretary-general Sadakazu Tanigaki told reporters. Prime Minister Shinzo Abe's office announced that he will hold a press conference today.
A delay might improve Mr Abe's prospects in an Upper House election next month, though it would renew doubts over Japan's ability to rein in its ballooning debt and fund social security for its rapidly ageing population.
Cabinet Office projections show that the government would not reach its fiscal targets even if the tax is raised as planned.
Mr Aso added that Japan still must fix its finances and that there has been no change to the government's target of achieving a primary balance surplus in the fiscal year starting April 2020.
After being reported as saying last weekend that an election must be called to consult the people if the tax hike was delayed, Mr Aso said yesterday that election timing was entirely up to the prime minister.
A previous increase in the tax to 8 per cent in 2014 pushed Japan into a recession, prompting the government to delay the next phase of the hike that had been originally scheduled for October last year.
Almost two-thirds of respondents to a poll published by the Nikkei newspaper on Monday said they opposed the consumption tax increase.
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