Japan's Abe may delay sales tax hike by two years, say media reports

Japan's Prime Minister Shinzo Abe explains his three new arrows of "Abenomics" policy, during a news conference at the party headquarters in Tokyo Sept 24, 2015.
Japan's Prime Minister Shinzo Abe explains his three new arrows of "Abenomics" policy, during a news conference at the party headquarters in Tokyo Sept 24, 2015.PHOTO: REUTERS

TOKYO (REUTERS) - Japanese Prime Minister Shinzo Abe is considering delaying a sales tax hike, originally planned in April 2017, by around two years, Japanese media reported on Friday (May 27).

Mr Abe would likely announce the delay as early as June 1, when the current parliament session closes, the Asahi newspaper said without citing sources.

The decision would come in the wake of a Group of Seven (G7) summit Mr Abe is hosting in western Japan, where he told the leaders the global economy may be on the verge of a financial crisis on the scale of the collapse of Lehman Brothers in 2008.

The postponement by two years would still allow Japan to meet its target of turning the country's budget deficit into a surplus by fiscal 2020, the Yomiuri newspaper said.

Mr Abe has pledged to raise Japan's sales tax to 10 per cent from 8 per cent in April next year, unless there is a financial crisis similar to the Lehman collapse or a major natural disaster.

However, with Japan skirting recession and inflation still anaemimc, many of his aides have proposed postponing the tax hike to ensure Japan makes a sustained exit from deflation.

Mr Abe will shortly convey his idea to Finance Minister Taro Aso and the head of his ruling Liberal Democratic Party's coalition partner, the reports said.

The Asahi also reported thatMr Abe would forgo calling a snap election of the lower house of parliament, instead focusing on an upper house election already scheduled in July.

There had been some speculation Mr Abe would call a lower house election to coincide with the upper house election.