Japanese Prime Minister Shinzo Abe tells lawmakers he's delaying a scheduled sales tax hike by two-and-a-half years in a move seen as popular, but that puts fiscal reform on the back burner. David Pollard reports.
Caught between a struggling economy and upcoming elections, it was perhaps an easy and obvious decision to take. (SOUNDBITE) (Japanese) JAPANESE PRIME MINISTER, SHINZO ABE, SAYING: "I have decided that the increase of sales tax, which could disrupt domestic demand, should be delayed. " But not a decision without controversy. Abe has repeatedly pledged to raise the sales tax from eight per cent to ten. But after a previous rise in 2014 tipped the economy back into recession, what would have been a key plank in his reform programme has now gone. Or is at least postponed - for two and half years. SOUNDBITE (English) IG SENIOR ANALYST, CHRIS BEAUCHAMP, SAYING: "Eight to ten per cent in sales tax is nothing huge, and to do that in the teeth of declining profits and in the teeth of declining consumer spending, and I think he's taken the right step." With perhaps an eye on upper house elections next month, Abe also spoke of a "bold economic package" to come later in the year. And with the latest readings on its economy lagging badly, fans of Abenomics say that will be needed. SOUNDBITE (English) IG SENIOR ANALYST, CHRIS BEAUCHAMP, SAYING: "Abenomics seemed to be working for quite some time, but overall it's a very much a damp squib and we need to shift to something more aggressive, more innovative to get the Japanese economy moving." But Abe's detractors point to what they call 'elusive' fiscal targets. Any further slippage on those, they say, could tip Japan into a dangerous downward spiral.