Speculation is mounting that the Japanese prime minister, Shinzo Abe, will call a snap general election next month, as he seeks a popular mandate to push back a second scheduled increase in consumption taxes.
The first increase in the tax, effective in April, was blamed for a sharp fall in Japan’s second-quarter output and a loss of momentum in the central bank’s bid to banish the deflation that has lingered for much of the past two decades. If Mr Abe can now consolidate his grip on power, analysts say, he could postpone the second increase scheduled for next October by a year or 18 months.
“I haven’t decided anything,” Mr Abe told reporters in Beijing on Tuesday evening. “I personally have never made any reference to the dissolution [of parliament].”
Three of the biggest domestic newspapers had reported on Tuesday that the prime minister was considering a lower-house election on December 14 or 21, citing senior members of the government and the ruling Liberal Democratic Party.
And a press conference on Tuesday before Mr Abe made his comments, chief cabinet secretary Yoshihide Suga did not shoot down the reports and said a decision on whether to go to the polls would be Mr Abe’s alone.
The decision could be announced as early as Tuesday next week, the reports said, following the release on Monday of preliminary gross domestic product data for the third quarter.
A successful campaign would reset the clock on Japan’s four-year election cycle, while improving Mr Abe’s chances of retaining leadership of the LDP at internal elections next September. The ruling coalition’s 85-seat majority in the lower house of parliament is likely to be big enough to survive challenges even with a very low turnout, according to Takao Toshikawa, editor of a political newsletter, who says that Mr Abe’s ear has been bent by pro-delay advisers such as Etsuro Honda and Koichi Hamada.
Yet such a move would still be a gamble for the prime minister, who has seen his support ratings dwindle amid a spate of scandals afflicting senior ministers, and as increases in wages struggle to keep pace with the rising cost of living.
During his campaign to unseat the Democratic Party of Japan two years ago, Mr Abe argued that he had the right policy mix to reinvigorate the world’s third-largest economy. But the impact of the first tax increase in April, from 5 per cent to 8 per cent, was stronger and longer than many had expected. Consumer confidence fell for a third straight month in October, the government reported on Tuesday, and remains lower than in May.
The approval rating of Mr Abe’s cabinet slipped to 44 per cent from 52 per cent last month, according to a poll released on Monday by NHK, the public broadcaster. Almost three-quarters of respondents said that the next tax increase – to 10 per cent – should be delayed or scrapped altogether, with just a fifth saying it should go ahead as planned.
The DPJ-led government passed the relevant laws in 2012, arguing that lifting Japan’s taxes on consumption – still among the lowest in the developed world – was the simplest and least painful way of tackling the huge budget deficit.
But with the Bank of Japan recently stepping up its stimulus efforts by buying another Y30tn ($260bn) of long-term government bonds each year, some officials are now arguing that fiscal consolidation can wait until the economy is on a more solid footing.
Robert Feldman, Tokyo-based head of economic research at Morgan Stanley MUFG Securities and a veteran Diet watcher, put the chances of a snap election at more than 50 per cent. He said Mr Abe would win support for being decisive; he could point to some policy successes such as Monday’s encounter with Chinese president Xi Jinping; and opposition parties remained weak and disunited.
Additional reporting by Mitsuko Matsutani and Nobuko Juji
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