19.11.201403:26:42UTC+00Abe delays sales tax hike and initiates early elections

In an announcement made yesterday, Abe postponed a further increase in Japan’s sales tax to 10% after the first hike last April led to two consecutive quarters of economic contractions. According to Abe, parliament will be dissolved on November 21st which analysts say will be followed by elections most likely on December 14th, almost two years earlier than prescribed in Abe’s four year term.

Japan’s Liberal Democratic Party, to which Abe belongs to, currently holds majority control with 60% of the parliament’s lower house counted as its party members. Abe is seen to be betting that the party’s dominance will be enough to make him stay in office until 2018 in order to continue his economic campaign against deflation and stagnant growth.

Executive director for the Asian Forum Japan, Katsuhiko Nakamura, says that the question raised by the elections could be, “Do voters want to continue efforts to improve the economy through Abenomics, even though its benefits may not have trickled down to them, or as the opposition are saying, has Abenomics failed?”

According to Abe, however, Japan’s current recession is not a sign that his program involving monetary easing and stimulus injection has failed. Governor Haruhiko Kuroda from the Bank of Japan has been a supporter of Abe’s policies for which he implemented a monetary policy that has increased exports and corporate earnings, including a 90% rise in Japan’s benchmark stock index, the Topix.

Households are seen to not have benefited from the improvement with real wages still on a 15 month decline.