TOKYO (Reuters) – Japanese Prime Minister Shinzo Abe said on Tuesday that he would call an early election to seek a fresh mandate for his economic policies, and postpone an unpopular sales tax rise, a day after data showed the economy had slipped back into recession.
The world’s third-biggest economy unexpectedly shrank for a second consecutive quarter in July-September, a sign that the pain from an initial rise in the sales tax to eight per cent from five per cent in April was lasting longer than expected.
Abe said he would delay a second increase to 10 per cent that had been scheduled for October 2015 for 18 months. He added he would dissolve the lower house on Friday for an election that must be held within 40 days. The vote is expected on December 14.
The prime minister – who returned to power in December 2012 pledging to revive growth with a radical mix of hyper-easy monetary policy, spending and reform – insisted his policies were working and challenged the opposition to come up with an alternative.
“I am aware that critics say ‘Abenomics’ is a failure and not working but I have not heard one concrete idea what to do instead … Are our economic policies mistaken, or correct? Is there another option?” he asked at a televised news conference.
“This is the only way to end deflation and revive the economy.”
But Abe pledged that the sales tax rise, needed to fund swelling social security costs and curb Japan’s massive public debt, would be implemented without fail in April 2017.