Japan needs solid recovery to proceed with tax hike: govt spokesman

Japan's Prime Minister Shinzo Abe and his party's lawmakers, including Taro Aso (left), at their party headquarters in Tokyo, Japan on Sept 28, 2017.
Japan's Prime Minister Shinzo Abe and his party's lawmakers, including Taro Aso (left), at their party headquarters in Tokyo, Japan on Sept 28, 2017. PHOTO: REUTERS

TOKYO (REUTERS, WASHINGTON POST) - Japan’s top government spokesman said on Friday (Oct 6) that it is important to create an environment where the country can proceed with a scheduled sales tax hike in 2019.

Chief Cabinet Secretary Yoshihide Suga said it would be impossible to raise the sales tax if job availability is as low as it was before Prime Minister Shinzo Abe took power in 2012 and the yen as high as it had been then.

“Japan is no longer in deflation, so we need to take policies to ensure a virtuous economic cycle kicks off,” he told a news conference. “We need to ensure the economy does not suffer a downturn when the tax rate is increased in 2019.”

The remarks suggest that Mr Abe may backtrack on his pledge to proceed with the scheduled sales tax hike to 10 per cent from 8 per cent, if the economy loses momentum.

Mr Abe announced last week a plan to call a snap election on Oct 22 in the hope his Liberal Democratic Party-led coalition would keep its majority in parliament’s lower house, where it held a two-thirds “super majority” before the chamber was dissolved.

But a new party led by Tokyo Governor Yuriko Koike has threatened the LDP’s base with a policy platform that includes freezing the unpopular sales tax hike, on grounds the higher levy would hurt private consumption.

Mr Abe’s ruling coalition has pledged to proceed with the sales tax hike and use the revenues for child care and education.

On Wednesday, Mr Abe told The Yomiuri Shimbun that he wanted to accelerate his Abenomics economic policies to strongly facilitate a virtuous economic cycle, and create an environment that allows for more wage hikes.

"The major point of contention is how to deal with the threat posed by North Korea and the declining birthrate. The upcoming election will determine the future of the country," he said.

The prime minister emphasised the achievements of Abenomics, saying: "Over the past five years, 1.85 million jobs have been created, and companies have achieved record-high profits."

Mr Abe also said the ageing population coupled with the chronically low birthrate is the "greatest barrier" to accelerating his economic policy plan.

Mr Abe reiterated his intention to resign as prime minister if the LDP and its coalition partner Komeito fail to secure a 233 or more majority of seats in the lower house in the general election.

Criticising Kibo no To's (Party of Hope) policy to freeze the planned consumption tax hike, Mr Abe said: "I wonder if they were always opposed (to the hike), or in what kind of situation they would raise (the rate). They should make statements responsibly, and they are being completely irresponsible."

There has been talk that Tokyo Governor Yuriko Koike, who leads Kibo, might run in the lower house election, but Mr Abe said that Ms Koike must decide her course of action on her own.

"Koike firmly received the responsibility of making the Olympics and Paralympics succeed from the mayor of Rio de Janeiro (which hosted the previous Olympics). Tokyo is the face of Japan, and she has the heavy responsibility of handling the Tokyo metropolitan government," Mr Abe said, suggesting that he wants Ms Koike to focus on her current job as the governor of Tokyo.