Courtesy of Mish.
In the wake of a completely “unexpected” Japanese return to recession, Shinzo Abe Delays Tax Rise and Gambles on Snap Election.
Rumours had been building in recent days that Mr Abe was preparing to dissolve parliament as he sought a new mandate to delay a second increase in consumption taxes, due next October. On Tuesday evening Mr Abe confirmed in a rousing 15-minute speech that he would go to the polls, challenging detractors to come up with better ideas to put Japan on a stronger growth trajectory.
Delaying the tax by 18 months was a “grave, grave” decision, Mr Abe said, but would be justified if Japan was to make a complete exit from the deflation it experienced for much of the past 15 years.
The weak data have caused many to question the multi-faceted revitalisation programme Mr Abe has pursued since reclaiming the premiership less than two years ago. So far, the most obvious effect of those efforts has been a collapse in the yen, which has boosted companies’ profits but pushed up people’s cost of living – a squeeze exacerbated by April’s tax increase, from 5 per cent to 8 per cent.
Household incomes have risen a little, boosted by overtime and bonuses. But base wages slipped 2.6 per cent in September when adjusted for inflation, the government reported on Tuesday, extending a stretch of year-on-year falls from May 2013.
“The trend hasn’t changed,” said Yukio Edano, secretary-general of the main opposition party, the Democratic Party of Japan, after Mr Abe’s address. “Even though share prices have risen over the past two years, the lives of the public have not improved.”
Not Improved or Gotten Worse?
With inflation-adjusted wages down 2.6%, and taxes up 3 percentage points from 5% to 8%, “lives of the public have not improved” is the understatement of the year for those in Japan not invested in the stock market.
In fact, those lives are 5.6% worse.
Better Ideas
Abe, the man who made lives 5.6% worse, challenges other to come up with “better ideas”. Here are two of Abe’s ideas.
- Abe announced a tax hike to 10 per cent “without fail” in April 2017
- Government would honour its longstanding pledge to balance its books – excluding debt-service payments – by the 2020 fiscal year
Abe’s Deal
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