Wednesday, June 01, 2016 1:45:38 PM
Abe to Delay Putting Japan’s Sales Tax Increase Into Effect
rime Minister Shinzo Abe of Japan announced on Wednesday that he would delay an unpopular increase in the national sales tax, in what amounted to an acknowledgment that the country’s economy remained worryingly fragile.
The decision, which was widely expected, was informed by painful experience: After Mr. Abe allowed a tax increase to go ahead in 2014, consumer spending dried up and Japan fell into recession. It was a serious setback for a leader who had won office on a promise to turn around Japan’s long-struggling economy.
Mr. Abe’s handling of the economy remains a contentious issue. Despite more than three years of sustained stimulus, the robust increase in wages and prices that he promised has failed to materialize. The governing Liberal Democratic Party and its smaller ally, Komeito, face an election for the upper house of Parliament next month, adding to the pressure.
Mr. Abe defended his economic record on Wednesday, saying that although it was still “a work in progress,” certain areas, like the unemployment rate and the frequency of corporate bankruptcies, had improved substantially. He blamed a weaker global economy — in particular the slowdown in China — for what he said was a growing threat to Japan.
“At worst, there’s a risk that we could return to the long tunnel of deflation,” he said. “We need to take action to guard against risks.”
Mr. Abe said he would delay the planned increase of two percentage points in the sales tax, known in Japan as a consumption tax, by two and a half years, to October 2019.
Higher taxes have never been a natural fit for Mr. Abe, whose economic agenda has focused more on encouraging growth than fighting deficits. The plan for a higher sales tax was passed into law by a previous government, and the prime minister has struggled with how to put it into effect.
Japan has the highest government debt in the world, equal to nearly two and a half years’ worth of economic output. But Mr. Abe and his supporters say that trying to close deficits by increasing tax rates or cutting government spending risks damaging the economy.
http://www.nytimes.com/2016/06/02/business/international/abe-to-delay-implementing-increase-in-japan-sales-tax.html?ribbon-ad-idx=5&rref=business&module=Ribbon&version=context®ion=Header&action=click&contentCollection=Business%20Day&pgtype=article
rime Minister Shinzo Abe of Japan announced on Wednesday that he would delay an unpopular increase in the national sales tax, in what amounted to an acknowledgment that the country’s economy remained worryingly fragile.
The decision, which was widely expected, was informed by painful experience: After Mr. Abe allowed a tax increase to go ahead in 2014, consumer spending dried up and Japan fell into recession. It was a serious setback for a leader who had won office on a promise to turn around Japan’s long-struggling economy.
Mr. Abe’s handling of the economy remains a contentious issue. Despite more than three years of sustained stimulus, the robust increase in wages and prices that he promised has failed to materialize. The governing Liberal Democratic Party and its smaller ally, Komeito, face an election for the upper house of Parliament next month, adding to the pressure.
Mr. Abe defended his economic record on Wednesday, saying that although it was still “a work in progress,” certain areas, like the unemployment rate and the frequency of corporate bankruptcies, had improved substantially. He blamed a weaker global economy — in particular the slowdown in China — for what he said was a growing threat to Japan.
“At worst, there’s a risk that we could return to the long tunnel of deflation,” he said. “We need to take action to guard against risks.”
Mr. Abe said he would delay the planned increase of two percentage points in the sales tax, known in Japan as a consumption tax, by two and a half years, to October 2019.
Higher taxes have never been a natural fit for Mr. Abe, whose economic agenda has focused more on encouraging growth than fighting deficits. The plan for a higher sales tax was passed into law by a previous government, and the prime minister has struggled with how to put it into effect.
Japan has the highest government debt in the world, equal to nearly two and a half years’ worth of economic output. But Mr. Abe and his supporters say that trying to close deficits by increasing tax rates or cutting government spending risks damaging the economy.
http://www.nytimes.com/2016/06/02/business/international/abe-to-delay-implementing-increase-in-japan-sales-tax.html?ribbon-ad-idx=5&rref=business&module=Ribbon&version=context®ion=Header&action=click&contentCollection=Business%20Day&pgtype=article
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