Ja­pan PM's pro­posed tax hike de­lay re­ceives lukewarm re­sponse

The Pak Banker - - MARKETS/SPORTS -

Ja­pan's prime min­is­ter pitched a plan to de­lay next year's sales tax hike to fel­low rul­ing party mem­bers on Mon­day, some of whom ex­pressed con­cerns that such a move would sig­nal a fail­ure of his poli­cies to re­flate the econ­omy out of stag­na­tion.

Prime Min­is­ter Shinzo Abe met sev­eral se­nior law­mak­ers to con­vey his in­ten­tion to post­pone the tax hike - among them, Masahiko Ko­mura, vice pres­i­dent of the rul­ing Lib­eral Demo­cratic Party. The pro­posal would mean a two-and-a-half year de­lay from April 2017 when the hikes were sched­uled to take ef­fect.

While some within his party have ex­pressed reser­va­tions about the move, Abe is not ex­pected to face any ma­jor op­po­si­tion to the pro­posal as his party ex­ec­u­tives are likely to present a united front ahead of the up­per house elec­tion in the sum­mer. "The pre­mier's de­ter­mi­na­tion to post­pone the tax in­crease seems to be very strong," Ko­mura told re­porters af­ter the meet­ing with Abe.

Ko­mura's comments con­firm what sources had told Reuters on Sun­day as Abe looks to avoid deal­ing a blow to a frag­ile eco­nomic re­cov­ery, with the an­nounce­ment on the tax decision ex­pected ahead of an up­per house elec­tion ex­pected in July.

Sadakazu Tani­gaki, sec­re­tary gen­eral of the rul­ing LDP, told re­porters on Mon­day there was no ma­jor op­po­si­tion to Abe's pro­posal to de­lay the tax hike in a meet­ing of the party's ex­ec­u­tives held late af­ter­noon.

Fi­nance Min­is­ter Taro Aso had on Sun­day voiced op­po­si­tion, say­ing that Abe should dis­solve the lower house of par­lia­ment and call a snap elec­tion if he were to post­pone the tax hike. And in a sep­a­rate meet­ing with Abe on Mon­day, Nat­suo Ya­m­aguchi, head of the Komeito party, LDP's ju­nior coali­tion part­ner, de­clined to sign off on the plan, say­ing only that he would dis­cuss the mat­ter with his party mem­bers.

Spec­u­la­tion has cen­tered on the pos­si­bil­ity Abe would call a snap elec­tion for the lower house in a bid to se­cure a man­date to post­pone the tax in­crease. This comes amid a surge in his ap­proval rat­ings fol­low­ing the G7 sum­mit and U.S. Pres­i­dent Barack Obama's his­toric visit to Hiroshima last week. How­ever, Toshi­hiro Nikai, an­other se­nior LDP of­fi­cial who met Abe on Mon­day, said the pre­mier did not ap­pear to have any im­me­di­ate plans to call a snap elec­tion.

Ex­pec­ta­tions the gov­ern­ment will de­lay the tax hike helped push Ja­pan's Nikkei stock in­dex .N225 to a onemonth high. De­spite some voices of dis­sent from within his own party, Abe is ex­pected to for­mally an­nounce the tax hike de­lay by the end of the cur­rent ses­sion of par­lia­ment on Wed­nes­day. The prime min­is­ter is also ex­pected to or­der an extra budget to boost stim­u­lus mea­sures, just two months into the fis­cal year and on the heels of a sup­ple­men­tary budget to fund re­build­ing ef­forts af­ter the re­cent earth­quakes in south­ern Ja­pan. Con­sump­tion has yet to re­cover af­ter Ja­pan fell into re­ces­sion when Abe raised the sales tax to 8 per­cent from 5 per­cent in April 2014 in an ef­fort to curb gov­ern­ment debt.

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