Abe to Announce Consumption Tax Hike Delay

Tokyo, May 30 (Jiji Press)--Japanese Prime Minister Shinzo Abe is expected to announce his plan as early as Wednesday to postpone the consumption tax hike for two and a half years to October 2019, informed sources said Monday. The ruling Liberal Democratic Party and its coalition partner, Komeito, are each working to produce an internal party consensus of support for the deferment, the sources said. Abe, also LDP president, met with Natsuo Yamaguchi, chief of Komeito, and executive officials of the LDP the same day to explain his plan to put off the tax hike, from 8 pct to 10 pct, currently set for April 2017. Moreover, the prime minister informed ruling party officials of his decision to stop short of dissolving the House of Representatives, the lower chamber of the Diet, Japan's parliament, for a simultaneous election with the triennial election for the House of Councillors, the upper chamber, this summer, the sources said. Abe intends to face voters' verdict on the tax hike delay in the Upper House election, for which the official campaign period is expected to start on June 22 for voting on July 10, according to the sources. At a meeting of LDP executives, Abe said he plans to hold a news conference shortly to explain his decision to defer the tax increase directly to the public. The announcement is expected to be made as early as Wednesday, the final day of the current ordinary Diet session. The consumption tax rate was raised from 5 pct in April 2014 in the first phase of a doubling of the rate, aimed at helping to finance surging social security costs in a rapidly aging society. In November 2014, Abe put off the second-phase hike to 10 pct by 18 months from the originally planned October 2015 amid growing uncertainty over the outlook for the Japanese economy. At his meeting with Abe, Komeito's Yamaguchi suggested that it would be desirable to go ahead with the tax increase as scheduled. Yamaguchi pointed to a three-way agreement in 2012 between the LDP, Komeito and the then ruling Democratic Party of Japan on an integrated reform of the social security and tax systems that paved the way for the two-stage consumption tax increase. He also noted that Abe promised to carry out the delayed second-phase tax hike without fail when he dissolved the Lower House for an election in December 2014. Yamaguchi then told Abe that Komeito respected the accord and the promise. But Yamaguchi told reporters after the meeting, "I felt the prime minister's strong wish" to put off the tax hike. The LDP executives were divided in their reactions to the proposed second delay in the tax hike. In separate meetings with Abe, LDP Vice President Masahiko Komura said the tax hike should be implemented in April 2017 as scheduled, while Tomomi Inada, head of the party's Policy Research Council, said the tax rate should be raised next year, even by one percentage point to 9 pct. Toshihiro Nikai, chairman of the LDP's General Council, supported the postponement for two and a half years. Despite the mixed views, however, the ruling parties are expected to accept the tax hike delay, as the prime minister is resolute about it, the sources said. Abe also held talks with Deputy Prime Minister and Finance Minister Taro Aso on Monday, following their previous meeting on Saturday. Aso has suggested that Abe dissolve the Lower House for a snap election if he decides on the tax hike delay. At their meetings, Abe and the LDP executives also discussed the possibility of a Lower House dissolution. Nikai revealed at a meeting of his faction that he had been told by Abe that he had decided not to call double elections for both Diet chambers. Meanwhile, the Democratic Party and three other opposition parties held a meeting of their leaders on Monday and decided to submit a joint no-confidence motion against Abe's cabinet on Tuesday, based on claims that a tax hike postponement would represent a failure of Abe's economic policies, dubbed Abenomics. Katsuya Okada, leader of the DP, told reporters that when Abe dissolved the Lower House for the December 2014 election, he pledged to create an economic environment that would allow the consumption tax increase. "The failure (to keep his promise) means that his cabinet should resign en masse," Okada said. END