Planned sales tax hike may be delayed if economy worsens to pre-2012 levels: Suga


Japan will not go ahead with a consumption tax hike planned for October 2019 if the economy deteriorates to levels seen before Shinzo Abe returned to the prime ministership in late 2012, the top government spokesman said Friday.

Chief Cabinet Secretary Yoshihide Suga said job availability stood at 0.83 and the U.S. dollar had been as low as ¥75 before Abe’s Liberal Democratic Party won a landslide victory and Abe launched his economic policy, dubbed Abenomics, in December 2012.

“If we raise (the consumption tax rate) in such a severe economic condition, the Japanese economy will worsen further,” Suga told a news conference.

However, Suga’s remark is at odds with a comment Abe made recently just before dissolving the Lower House for the Oct. 22 general election. Abe said in a television program the government will increase the consumption tax “unless something happens on the scale of the Lehman shock,” referring to the global financial crisis following the collapse of U.S. investment bank Lehman Brothers Holdings Inc. in 2008.

Suga made the remark after a new opposition party led by Tokyo Gov. Yuriko Koike pledged to freeze the scheduled 2 percentage-point sales tax hike as part of its campaign platform for the House of Representatives’ election.

The sales tax hike is expected to be one of the major issues during the election campaign as Abe’s LDP is proposing to spend a large proportion of the extra revenue from a planned tax increase on social welfare initiatives for children and the childbearing-age population.

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