Japan’s surprise recession leads Abe to call snap polls
19 Nov 2014 11:28 PM GMT
Prime Minister Shinzo Abe said on Tuesday he was calling a snap election and delaying an expected sales tax rise after figures showed Japan was in recession.
Less than two years after he swept to power pledging to reinvigorate the flagging economy, Abe will go to the polls — probably in the middle of next month — telling voters that more needs to be done to fix years of growth-sapping price declines.
‘I will dissolve the lower chamber on 21st November,’ Abe told a news conference.
He did not give a date for the election, which was not due until 2016, but the media consensus is that it will be Sunday, 14 December. The last 24 months have seen two of the so-called ‘three arrows’ of ‘Abenomics’ fired — massive fiscal stimulus and a flood of easy money. A third ‘arrow’ of structural reforms remains stuck in the quiver, a victim of the vested interests it is intended to undermine.
At its heart, Abenomics is intended to push prices up and get Japanese shoppers spending, with the aim of generating a self-reinforcing recovery as companies employ more people to meet growing demand. The measures have sent the yen plunging, pushing up the cost of imports, including the fossil fuels used to power the country.
That stretched consumers — 60 per cent of the economy —who were then walloped again in April by a rise in sales tax from 5.0 to 8.0 per cent, resulting in two consecutive quarters of contraction. A growing clamour has been heard over recent months to suspend part two of the tax rise, to 10.0 per cent, which was due for October. ‘Today, I reached a conclusion that I will not raise the consumption tax to 10 per cent in October next year... and that it should be delayed by 18 months,’ he said.
Less than two years after he swept to power pledging to reinvigorate the flagging economy, Abe will go to the polls — probably in the middle of next month — telling voters that more needs to be done to fix years of growth-sapping price declines.
‘I will dissolve the lower chamber on 21st November,’ Abe told a news conference.
He did not give a date for the election, which was not due until 2016, but the media consensus is that it will be Sunday, 14 December. The last 24 months have seen two of the so-called ‘three arrows’ of ‘Abenomics’ fired — massive fiscal stimulus and a flood of easy money. A third ‘arrow’ of structural reforms remains stuck in the quiver, a victim of the vested interests it is intended to undermine.
At its heart, Abenomics is intended to push prices up and get Japanese shoppers spending, with the aim of generating a self-reinforcing recovery as companies employ more people to meet growing demand. The measures have sent the yen plunging, pushing up the cost of imports, including the fossil fuels used to power the country.
That stretched consumers — 60 per cent of the economy —who were then walloped again in April by a rise in sales tax from 5.0 to 8.0 per cent, resulting in two consecutive quarters of contraction. A growing clamour has been heard over recent months to suspend part two of the tax rise, to 10.0 per cent, which was due for October. ‘Today, I reached a conclusion that I will not raise the consumption tax to 10 per cent in October next year... and that it should be delayed by 18 months,’ he said.
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