Spotlight: Second delay of tax hike in Japan proves futility of Abenomics

Japan's Prime Minister Shinzo Abe broke his word Wednesday by putting off the scheduled consumption tax hike, a second delay which he had promised would not happen unless huge economic crises or severe natural disasters break out. But what is to blame is perhaps Abenomics itself.

The Japanese government increased the consumption tax rate in April 2014 from 5 to 8 percent, and had a plan to lift it to ten percent in October 2015 to improve the bad fiscal health with a big deficit.

But the second round of tax hike has been postponed twice -- the first time from October 2015 to April 2017, and this time from April 2017 to October 2019.

Abe attributed the latest decision to "a new judgment," saying the current global economic conditions look similar to the situation in 2008, and the government must seek confidence from the people.

He also said Wednesday the government was planning to make July 10 the polling day for the upper house election, in which his party would likely win votes with the new delay decision.

In November 2014, when Abe delayed the tax hike for the first time, he decided to dissolve the lower house and hold early elections.

Slogans like "seeking confidence from the people" and "leave the choice (concerning the tax hike) to the people" have been used twice by Abe to bolster the sway of his party in the parliament.

At the G7 summit which he hosted last week, Abe made a pessimistic assessment of the world economy in an apparent attempt to justify postponing the consumption tax hike scheduled for April 2017, according to a Kyodo article.

However, pushing back the planned hike cannot hide the failure of "Abenomics" policies featuring large-scale monetary easing, flexible fiscal spending and structural reforms to end deflation. On the contrary, it raises questions concerning and increases dissatisfaction toward Abe's economic governance.

After the first delay, Japan's economy declined, with domestic consumption being hit hard, imbalances within the business world worsening and people getting angrier.

Abe on Wednesday denied that Abenomics had failed. But a Wall Street Journal report said "the continued delays in the sales-tax increase point to an economy that is too fragile to withstand even small blows..."

On May 31, Abe sustained a non-confidence bill submitted by the opposition parties, but he could not easily bypass the difficulties facing the country, as the second postponement made the outlook of the Japanese fiscal reform even more uncertain.

With a growing aging population, the government's fiscal pressure is growing as well. The International Monetary Fund (IMF) said the ratio of Japan's government debt to its GDP may reach 250 percent by 2020 if the country maintains its current fiscal policy.

Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development, has suggested Japan raise its consumption tax rate by at least 15 percent. The IMF has also urged Tokyo to increase the rate to 10 percent as scheduled to raise more tax income.

Faced with questions from the outside world, the debt-ridden Japanese government has been on the one hand enlarging its budget, and on the other promising on various occasions to reach a fiscal balance in the fiscal year of 2018, and even a surplus in the fiscal year of 2020.

On Wednesday, Abe stressed that the plan of fiscal health improvement will not halt. But the new postponement cast a shadow on the plan.

An official from the Japanese Financial Ministry said the double delays have caused the collapse of the integrated reform of the social security and tax systems, implying that the fiscal health plan may go bankrupt.

The opposition parties also accused Abe's government of not being able to secure the tax income resources, blaming Abenomics. Endi