Japanese Primer Minister Shinzo Abe announced Tuesday that he will dissolve the House of Representatives on Friday in an effort to seek approval for his growth-focused economic policies.
The decision comes a day after the Japanese economy fell into a recession.
At a press conference Abe said he has decided to postpone an additional consumption tax rate hike by 18 months until April 2017. The hike, which would increase sales tax to 10%, was originally set to go into effect in October next year.
The Japanese gross domestic product (GDP) fell by an annualized 1.6 percent in its third quarter, after a 7.3 percent drop in the second quarter.
The contractions are largely attributed to the 3 percent increase in sales tax in April.
The reason why the Japanese leader is dissolving parliament is to create a popular mandate for his economic policies, focusing on growth. Many in his party are calling for immediate action on the Japanese public debt – the biggest of any developed country and twice the size of its economy.
In reference to his announcement on the consumption tax, Abe said it was “a grave, grave decision.” Adding, “I ought to seek the people’s mandate over my decision by holding an election,”
“However, I clearly declare today it will never be postponed in the future,”
“Whether my economic policies are right or wrong [on the nation’s economy], or there is any other option, I’d like to hear the people’s opinions via the coming election,”
Japan analyst at New York-based Teneo Intelligence, said:
”A recession will give opposition party attacks on Abe more salience, suggesting the possibility that the ruling coalition could lose seats,”
“At present, the premier is stuck between an elite consensus that favors the tax hike and a public that is opposed to going through with the second hike next year.”
In addition, many Japanese economists are saying that Abenomics is simply not working, citing the lack of wage increases that has caused Japanese consumers to reduce spending as prices for fuel and food rise.
Large Japanese exporters appear to be the only group that to have benefited, excelling from the yen’s big fall against the dollar and other major currencies.
The leader of the main opposition Democratic Party of Japan, Banri Kaeda, said:
“It is clear that Abenomics has not had any positive impact at all on people’s lives,”
“It may be true that some corporations and high-income earners have benefited, but, on the other hand, are the majority of people better off? Are small and medium-sized businesses doing well?”
A general election is set on Dec. 14, with campaigns starting on Dec. 2.
