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Japan PM to seek fresh mandate for "Abenomics" with snap poll

(Xinhua) Updated: 2014-11-19 07:29

Japanese Prime Minister Shinzo Abe told a press conference Tuesday that he decided to delay the second round sales tax hike by 18 months and he will dissolve the lower house on Nov. 21.

The consumption tax hike from 8 percent to 10 percent planned to be carried out in October 2015 will be postponed by 18 months to April 2017 as "the 3-percentage sales tax hike in April 1 weighed heavily on economy growth," said the prime minister.

The Japanese economy contracted an annualized real 7.1 percent in the second quarter of 2014 in the wake of the first round of tax change from 5 percent to 8 percent and its economy retreated an annualized 1.6 percent in the third quarter, showing Japan slipped in technical recession.

Abe said in the press briefing that to further raise sales tax as planned would jeopardize his efforts to pull out the country from its prolonged deflation, but he added that the second round consumption tax hike will not be delayed again.

In order to delay the tax hike stipulated by law, Abe said he is "going to dissolve the House of Representatives on Friday" so as to ask public opinions over his decision on the sales tax hike postponement.

Japan will call a snap general election on Dec. 14, local reports quoted lawmakers from the ruling coalition as saying, and the prime minister said that he will resign if his ruling Liberal Democratic Party and ruling partner the Komeito party failed to secure the majority in the lower house.

By calling a halfway general election, analysts said that Abe is trying to take the advantages of opposition's unpreparedness to win the election to extend his rule two more years to 2018 so as to better pass unpopular bills related to the rights of the collective self-defense.

On the Japanese economy, Abe said his "Abenomics" featured by three arrows, namely aggressive monetary easing, fiscal stimulus and growth strategy, have taken positive effects that have been proved by some important economic indicators such as employment rate.

But the prime minister said that the country's economy "has yet to return to a recovery path" as the third quarter data on gross domestic product showed Japan's economy slipped in recession, and Abe said the government will craft an extra budget for the current fiscal year so as to boost consumption and economy here.

Abe said Japan will also recover the country's financial health which is the worst among the major industrialized economies and will stick to budget surplus goal by fiscal 2020.

Japanese business circle, however, reacted mixed over Abe's decision to delay the sales tax hike, with some welcoming the postponement by saying they are concerned about consumption shrink, said local reports.

But, the Keidanren, the country's most powerful business lobby, said in a statement that Japan should show the world "a new pathway toward fiscal restoration" and demanded that the government devise a stimulus package that will help "expand further a virtuous economic cycle."

The sales tax hike aims to enlarge Japan's tax revenue so as to address increasing costs on social security brought by its severe aging society.

Japan's opposition parties also reflected quickly to Abe's decision to dissolve the lower house, with Banri Kaeda, president of Japan's major opposition party the Democratic Party of Japan, criticizing Abe's economic policies by saying that the GDP data released Monday showed that the "Abenomics" was misguided.

While Yoshiki Yamashida, head of the Japanese Communist Party's secretariat, said that problems exist in Abe's administration in the past two years and the government has gone against public wishes, adding that the party will make efforts to bring a new politics here based on public wills and to halt Abe's "runaway policies."

Secretary General of the People's Life First Party Katsumasa Suzuki said the prime minister has pursued his personal interests rather than his party's interests, adding that if the two major opposition parties could unite to tackle the coming snap general election, his party is prepared to cooperate and join them.

Social Democratic Party leader Tadatomo Yoshida said "Abenomics " is virtually a failure and the dissolve of the lower house is to hide the reality, adding that his party will cooperate with other opposition parties so as to force Abe out of his position.

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