Japan to postpone sales tax hike to 2019

31 May 16

Japanese prime minister Shinzo Abe is set to announce a delay in a planned sales tax increase until October 2019 amid concerns that the hike could hit growth.

The country had planned to increase consumption tax from 8% to 10% next April. However it has been expected this would be delayed ever since it emerged that the country only narrowly avoided a recession at the start of this year. 

This would be the second delay of the increase, which was initially scheduled for October 2015 as part of so-called Abenomics ­­­– a combination of monetary easing, flexible fiscal policy, and structural reforms intended to cut the deficit in future years.

However, the last rise – from 5% to 8% in April 2014 – hit consumer spending and put the country into a recession.

The further postponement, which is likely to be confirmed this week, would mean that the increase would be scheduled for after Abe’s term as Liberal Democratic Party president, and therefore prime minister, is due to end in 2018.

“We have no other options but to postpone the sales tax increase,” Hakubun Shimomura, an Abe aide, said in a TV interview reported by the Guardian.

“If the increase means a decline in tax revenue for the government, that would threaten our ability to achieve the goals of Abenomics.”

The decision follows a G7 summit held in Japan which concluded that pursuing strong global growth will be their “urgent priority”. At the summit, Abe argued for increased public spending to boost growth.

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