Japan's Abe to further delay planned sales tax hike: media report

Japanese Prime Minister Shinzo Abe has decided to hold off for the second time the consumption tax hike planned for next April, local media reported Friday citing sources close to Abe.

The decision was expected to be announced as early as Monday, and the tax hike could be put off for two years or 18 months until the autumn of 2018 when Abe's term as president of the ruling Liberal Democratic Party expires, said Japan's Kyodo News.

Abe has hinted about the possibility of the tax hike delay a day earlier on the G7 summit, telling other Group of Seven leaders that the current global economic conditions look similar to "the situation before Lehman."

Abe was referring to the 2008 collapse of U.S. investment bank Lehman Brothers Holdings Inc., which led to the global financial meltdown and economic downturn. He cited the plunge in crude oil and other commodity prices in recent years.

Japan decided in 2012 to increase the sales tax by three percentage points to 8 percent in April 2014, and then to 10 percent in October 2015, in order to raise tax revenue and to turn the primary balance into a surplus by fiscal 2020.

Abe postponed the second tax hike in November 2014 amid sluggish economic growth, and has repeatedly said since then that he would stick to the plan of raising sales tax in April 2017 unless there was a financial crisis similar to the 2008 Lehman crisis or disasters equivalent to the earthquake and tsunami in 2011.

The further delay is likely to put a brake on Japan's efforts to pursue fiscal consolidation, as its fiscal health is the worst among major industrialized economies with public debt at more than 200 percent of nominal gross domestic product. Endit