Prime Minister Shinzo Abe will likely announce as early as Monday whether the government will raise Japan’s consumption tax next April as planned, sources close to the matter said Thursday.
Amid signs of weakness in the domestic economy, including sluggish consumer spending, as well as gloomier prospects for the world economy, Abe is widely seen as inclined to delay the tax hike to 10% from the current 8%, scheduled for April 1.
The current global economic conditions look similar to “the situation before Lehman,” Abe told other Group of Seven leaders Thursday when the advanced economies began a two-day summit in Japan, according to a senior Japanese official.
Abe was referring to the 2008 collapse of U.S. investment bank Lehman Brothers Holdings Inc, which led to the global financial meltdown and economic downturn. He cited the plunge in crude oil and other commodity prices in recent years.
But some lawmakers in his Liberal Democratic Party are still calling for raising the tax rate as planned, as Abe has already delayed the hike, which was originally scheduled for October last year.
The government has said the hike is crucial to improving Japan’s fiscal health, the worst among major developed countries, at a time when the country has been facing swelling welfare costs due to an aging population and low birthrate.
Abe has said the government will raise the tax rate unless there is major economic turmoil on the scale of the “Lehman shock” or a major natural disaster. He has yet to make clear whether the recent strong earthquakes in southwestern Japan, which disrupted manufacturing and hurt tourism, will fall into the category he has mentioned.
Opposition parties have underscored that if Abe delays the tax hike, it means he has failed to revitalize the economy enough while in office since late 2012.
Abe’s announcement of his decision will come before the House of Councillors’ election this summer, the sources said.