- Bank of Tokyo Mitsubishi
As a December deadline approaches for deciding whether to go ahead with the second tax rise, Japan Prime Minister Shinzo Abe is seen to postpone a planned sales tax hike as economic recovery of the world's third biggest economy remains fragile to withstand another blow. Some of Abe's advisers have urged to delay the lift for 18 months to April 2017. Many experts, however, believe the government should proceed with the tax increase despite the risk of slowing economic recovery. In an effort to address its swelling government debts and increasing cost of caring for its rapidly aging population, Japan decided back in 2012 to boost its value-added tax, known as the consumption tax, from 5% to 10% in two stages. Earlier this year, a sales tax hike to 8% from 5% in April sent the nation's economy into its deepest recession since the global financial crisis and seriously dented consumer sentiment and consumer spending. To counter the effects of the slowdown that followed April's tax increase, the Bank of Japan and its the government pension fund made surprise announcements to inject trillions more yen into the flagging economy and buttress efforts to end deflation. One option being currently considered was for Abe to call a snap poll before the end of the year if he decides to delay a planned but unpopular sales tax increase to 10% from next October. An early election would likely lead to a win for Shinzo Abe's party, thus reaffirming public confidence in his party's policies.
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