TOKYO (AFP) – A set of economic data due in Japan on Monday look likely to determine the fate of “Abenomics”, with anticipation a poor showing from third quarter GDP figures will prompt a general election.
Unless the July to September Gross Domestic Product figures show an unexpected rally, Monday’s release is likely to provide the catalyst for Prime Minister Shinzo Abe to rule out a promised consumption tax rise and seek a new popular mandate, two years ahead of schedule.
The tax rises are aimed at paying down Japan’s enormous national debt, but they have put Abe in a tricky position as he tries to balance them with his pro-spending growth plan – dubbed Abenomics.
The market’s median forecast is for a 2.47 per cent annualised growth rate, according to a survey of some 40 economists conducted by the Japan Center for Economic Research.
That would sidestep a technical recession, after Japan’s GDP shrank an annualised 7.1 per cent in the second quarter, but it pales next to the ringing endorsement that came in during the first three months of the year, when the economy grew 6.0 per cent.
Since his late 2012 election, Abe’s plan to conquer years of deflation that have held back growth in the once world-beating economy had been bearing fruit.
But those efforts stumbled as consumers closed their wallets – and nervous firms capped their own spending – after sales taxes rose to 8.0 per cent from 5.0 per cent on April 1.
While most commentators said a dip in spending was inevitable after the rise – shoppers had front-loaded ahead of the increase – the second-quarter contraction was much more painful than many economists had expected.