Roundup: Abe to announce further delay to tax hike as efficacy of "Abenomics" in focus

Japanese Prime Minister Shinzo Abe will on Wednesday officially announce a delay in an already rescheduled planned hike of the nation's consumption tax, as the nation's waning public consumption has undermined his flawed "Abenomics" policies and will now see the levy increase delayed from April 2017 to October 2019.

The latest delay marks the second time the sales tax hike has been pushed back by the Japanese leader following the first tax hike under Abe in 2014, when he sanctioned a rise by 3 percent to 8 percent, which resulted in the economy, already mired in deflationary pressure, being plunged into recession as consumption was choked and import costs weighed heavily owing to a relatively strong yen, while exports were sluggish as overseas demand waned.

At that time, as is still the case, the government was also buckling under the ever-increasing burden of its mounting public debt that has since skyrocketed to around 240 percent the size of the nation's gross domestic product, making Japan, the world's third-largest economy, one of the most debt-ridden countries in the industrialized world.

Japan's debt crisis and its need to generate much-needed revenue from increased tax is being quickly compounded by a demographic crunch, as the nation continues to age, meaning increasing social welfare costs, while the population simultaneously shrinks, meaning a hollowing out of the key wage earners and hence tax payers.

Abe's controversial move to once again delay the tax hike has a number of implications ahead of this summer's upper house election and with regard to the possibility that the prime minister, despite a number of statements made by him to the contrary, may dissolve the more powerful lower house of parliament and call a double election.

Observers have said that in doing so, with economics as the political spin that is given to the public, and while his popularity ratings are relatively high following the recent Group of Seven leaders' summit held here last week, which saw U.S. President Barack Obama pay a visit to Hiroshima and deliver an impassioned speech to the survivors of the wartime A-bombed cities, including Nagasaki, Abe could use the opportunity to forge ahead with a post-upper house public referendum to officially amend Japan's Constitution.

The referendum requires a 50 percent majority backing from the public. Others close to the matter have said the prime minister may hold off on dissolving the lower house until the economy has made some tangible headway, at which time he will still have the leverage needed to extend his time in office, while amending the Constitution and fully reinstating Japan's military and overseas operations, currently prohibited under the Supreme Law.

Political watchers have also said the timing of his decision, may also be affected by the current U.S. presidential race, if not the actual outcome.

Opposition parties, along with a number of senior economists, have pointed out that yet another delay in the tax hike, in the short term, sends a message to the Japanese public as well as global markets that the prime minister's "Abenomics" policy mix, involving monetary easing and aggressive spending, has failed and this will further lead to consumers tightening their belts, households not spending, as well as prolonging an already protracted period of stagnant wage increases.

Market players also proffered that the move could lead to increased volatility as confidence in Japan's economy continues to diminish.

The Japanese leader told a meeting of his ruling Liberal Democratic Party (LDP) members earlier Wednesday of his plans to announce the tax hike delay in a press conference to be held later in the day. Endit