EDITORIAL: Abe shifts blame from himself for his decision to delay tax hike
Prime Minister Shinzo Abe’s explanation about why he decided to delay the scheduled consumption tax hike again is far from convincing.
In a June 1 news conference, Abe tried--but failed--to make his case that there is a compelling case to delay the increase in the consumption tax rate to 10 percent, slated for April 2017.
The long and short of what he said at the news conference is this:
Far from being convincing, his call for “revving up the engine of Abenomics as much as possible” raises concerns about heightened risks involved in his expansionary economic policy program.
This will be the second delay in the tax increase. It was originally scheduled for October 2015, but Abe in November 2014 announced the postponement of the step to April 2017.
Since that announcement, Abe had reiterated that he would go ahead with the plan to raise the tax rate to 10 percent unless Japan is hit by serious economic tumult, like the global crisis triggered by the 2008 collapse of U.S. investment bank Lehman Brothers or the downturn following the 2011 Great East Japan Earthquake.
In the June 1 news conference, Abe admitted that nothing like the “Lehman shock” crisis is taking shape. He also denied that his change of mind had been caused by the series of strong earthquakes that have rocked Kumamoto Prefecture and surrounding areas since mid-April.
On the other hand, Abe contended that Abenomics had produced notable results, pointing to job and income growth.
If that’s his view about the economy, he should raise the consumption tax as planned to cure the government’s fiscal ills and enhance the financial standing of the social security system.
In trying to justify his move, Abe mentioned concerns about the economic health of key emerging countries, including China.
During the recent Ise-Shima summit of the Group of Seven major industrial nations, Abe repeatedly referred to the global recession caused by the failure of Lehman Brothers. But the leaders of Britain and Germany refused to buy his argument.
While Abe admitted that the current situation is not similar to the aftermath of Lehman Brothers’ demise, he pointed to overseas economic uncertainties as the reason behind his policy decision. By doing so, he has effectively shifted the responsibility to emerging countries.
As for pushing back the tax increase by two-and-a-half years to October 2019, Abe claimed that is the maximum possible delay that can be made without giving up the government’s target of restoring fiscal health by fiscal 2020.
The fiscal rehabilitation target is an extremely ambitious one that will not be achieved even if the consumption tax is raised as planned and the Japanese economy grows at rates over 3 percent annually.
Reaching the target requires constant efforts to review and reform the budget for substantial spending cuts. But Abe’s approach is totally dependent on revenue growth expected from economic stimulus, which is no more than a shot in the arm. Is this the right way to tackle the formidable challenge?
Abe also said he will seek a public mandate for this policy decision in the upcoming Upper House election.
Few people would welcome a tax hike even if they understand the need for the step.
In a recent Asahi Shimbun poll, 59 percent of the respondents said the tax increase should be postponed, compared with 29 percent who said the step should not be delayed.
Abe’s request for voters to support his decision to delay an unpopular measure is tantamount to pushing the pretext that the public has approved his broken policy promise.
It is actually a scheme to take advantage of public sentiment about the tax hike to shunt his responsibility for the controversial move to the voting public.
Voters need to express their views about the prime minister’s self-centered political maneuver in the Upper House election.