 "Japan economy shrinks more than expected")
Japanese Prime Minister Shinzo Abe on Wednesday said he will delay an already planned controversial sales tax hike of 10% further from April 2017 to October 2019, a sign that his once-revered 'Abenomics' has failed to breathe life into Japan's ailing economy.
Abe said the delay was necessary to support not just the Japanese growth but also the global growth and that some of his decision making was made following the outcome of the Group of Seven (G7) leaders summit he hosted last week in Japan, Xinhua reported.
He said, the delay was also necessary to avoid a substantial drop in domestic demand, adding the consumption tax hike as he planned could severely hurt domestic demand.
Abe said that his government will prepare more fiscal stimulus this fall amounting up to six trillion yen ($54 billion).
Abe initially announced his decision to delay the tax hike to his ruling Liberal Democratic Party (LDP) members at a meeting earlier in the day.
The delay is a blow to Abe as his ascension to office in December 2012 was based predominantly on his 'Abenomics' policy mix cure, that through aggressive monetary easing, fiscal spending, and structural reforms, would rescue Japan from the economic stagnation as well as work towards the nation's decades of deflationary pressure alongside the central bank.
Economists have been quick, however, to point out that this has not been the case, and Abe's announcement this evening is a testament to the failure of his policy mix, with the announcement acting as a double-edge sword.
Abe bought himself more time to get his fiscal house in order, but not following through with his planned hike as per his original schedule, has lost public and market faith, which could further impact falling domestic consumption as well as create volatility in both the stock and the currency markets.
In light of this a no-confidence motion was filed against Abe's cabinet, by four opposition parties a day earlier, although the Japanese lower house on Tuesday shot down the petition.
The parties blasted Abe's economic and other policies, and took aim at him and his party ahead of the July upper house election.
The opposition parties believe Abe postponing the sales tax hike is a tacit admission that 'Abenomics' has utterly failed and worsened Japan's economic situation.
In December 2014, Abe first delayed the tax hike and called a snap election, with observers not ruling out the possibility that a double election could be called in July, although the Japanese leader denied that such an occurrence could happen this summer.
