POSTPONE AND BE DAMNED

Doubts about the prime minister’s economic record are growing

ALL things considered, the month of May ended well for Shinzo Abe, Japan’s prime minister. He hosted his fellow leaders from the rich world’s club, the G7, at a summit at Ise in Mie prefecture last week. It went well. He welcomed them at a Shinto shrine founded 1,300 years ago. Just after the summit Barack Obama became the first sitting American president to visit Hiroshima, which an American atom bomb levelled on August 6th 1945. Japanese of all ages and backgrounds were moved by his speech, and by his embrace of a survivor. Mr Abe basked in the reflected political glow.

That gave the prime minister ample cover to announce, on June 1st, that he would put off raising Japan’s consumption tax from 8% to 10% from April of next year to October 2019. This marks the second such dodge; the previous one occurred in November 2014. Mr Abe’s advisers would have preferred to postpone it indefinitely, but settled for a point after his term as president of the Liberal Democratic Party (LDP) is currently due to end, in September 2018.

Economically, the postponement looks prudent. Japan’s economy is struggling. Many worried that a second tax increase would knock it flat. When Mr Abe raised the rate from 5% to 8% in April 2014, the economy tipped back into recession.

But politically it carries risks. Mr Abe had promised that the rise would be carried out “without fail”. He said that nothing short of a massive natural disaster or an economic cataclysm similar to the global crisis sparked in 2008 by the collapse of Lehman Brothers, an investment bank, would prevent it from going ahead. Neither kind of calamity has materialised. At the G7 summit Mr Abe tried to persuade his fellow leaders that the global economy could be on the brink of a Lehman-scale crisis, in a vain effort to justify the postponement. He found no takers.

The precedent that Mr Abe set after the first delay, when he called a snap general election to seek voters’ approval, seemed to demand another poll. It could have coincided with one that will be held for half of the seats in the upper house of parliament on July 10th. The possibility of such a rare “double” election prompted fevered speculation for weeks.

But in the end Mr Abe decided to hold off, despite his approval rating having risen above 50% after the summit and Mr Obama’s visit to Hiroshima. The LDP and its coalition already hold just over two-thirds of the lower house, with 326 out of 475 seats. Party strategists reckoned the risks were all on the downside. Tax rises, of course, are never popular, but neither are leaders who fail to keep their promises.

The delay adds to voters’ impression that Mr Abe’s economic policies are going astray. On May 31st the main opposition parties— the Democratic Party, the Japan Communist Party, and two smaller groups—filed a no-confidence motion against the government, citingits failure to en act the promised tax rise as evidence that “Abenomics” is failing (thanks to the government’s majorities in both houses, it was swiftly voted down).

Quantitative easing, which the Bank of Japan (BoJ) began in 2013, weakened the yen while boosting corporate profits and share prices. But an uptick in the currency, even as the central bank introduced negative interest rates from January onwards, has sunk the stockmarket. A recent BoJ survey showed that businesses are gloomier than they have been for three years. Mild deflation has returned. Fears that Japan had recently fallen into recession were assuaged by the news that, in the first quarter, GDP expanded by an annualised 1.7%. But the extra day of activity provided by a leap year contributed to the figures. Underlying private demand remains weak.

To reverse these trends Japan must hack through the web of regulations hindering growth. The latest “Japan Revitalisation Strategy” proposed by Mr Abe’s government falls well short of the task. With such woolly goals as restoring consumer confidence and bringing about a “fourth industrial revolution” through IT and artificial intelligence, it has been roundly criticised.

Meaningful reforms—such as preventing Japan’s vast, quasistatist system of farm co-operatives from gouging hard-up farmers with high prices for farm supplies—are stalling. Resistance is also building to liberalisation of the electricity market, a long process that began on April 1st. Structural reform has been painfully slow, says Yoichi Funabashi, chairman of the Rebuild Japan Initiative Foundation, a think-tank, because the vested interests of the LDP still hold sway.

Meanwhile, shelving the tax increase will leave Japan’s finance ministry less able to convince markets that Japan will tame its swelling debt—now more than 240% of GDP, more than in any other rich country. Mr Abe pledged to keep a longstanding goal of eliminating the primary budget deficit by the fiscal year 2020. Economists doubt he can do this.

Even so, in the election for the upper house due in less than two months, the LDP is expected to do well. Mr Abe’s ultimate goal— winning a coalition to give him two-thirds of the seats, enough to let him rewrite Japan’s pacifist constitution—may prove elusive. But the LDP could still win a majority on its own, allowing it to govern more independently of Komeito, a Buddhist-backed party that sits to its left in several policy areas. Not since 1989 has the LDP held majorities in both chambers. For all the doubts surrounding Mr Abe’s handling of the economy, voters seem unconvinced that the opposition could do better.