Japan Press Weekly

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2016 March 23 - 29 [ECONOMY]

Abe should acknowledge failure of ‘Abenomics’ and cancel consumption tax hike plan

Akahata editorial (excerpt)

The view is spreading that the Abe government may postpone the consumption tax rate hike from the current 8% to 10% currently scheduled for April 2016. Cabinet ministers and parliamentarians of the ruling Liberal Democratic and Komei parties have made remarks to this effect one after another. The Abe government’s “Abenomics” economic policy has failed to revitalize the Japanese economy. Personal consumption has remained sluggish since the consumption tax rate was increased from 5% to 8% in April 2014. What makes it clear is that if the planned tax hike is implemented under such circumstances, it will devastate the economy and people’s livelihoods. The Abe government should cancel the tax hike plan.

The prime minister has reiterated that he will carry out the tax hike plan unless a calamitous incident like the Lehman Shock or a massive earthquake happens. On the other hand, stressing the need to foresee the development of a shrinking of the world economy, he has held a series of international financial and economic analysis meetings with experts from Japan and abroad.

On the first day of the meetings (March 16), Joseph Stiglitz, professor at U.S. Columbia University, advised postponing the tax increase and on the third day (March 22), Paul Krugman, professor at the City University of New York, also said that it is not the time to raise the consumption tax. There is a possibility that the Abe government will decide to reschedule the tax increase.

PM Abe should not use “the shrinking of the world economy” as a pretext for the rescheduling. He needs to acknowledge that his Abenomics policy itself has damaged Japan’s economy and undermined the conditions suitable for the tax hike as Japanese Communist Party Dietmember Koike Akira pointed out in the House of Councilors Financial Affairs Committee meeting on March 22.

Under the Abenomics policy, the Japanese economy is in a “vicious cycle”; large corporations have made huge profits, but this did not lead to higher wages and larger consumer spending. The government in its monthly economic report in March admitted that economic activity is slowing down. Chief Cabinet Secretary Suga Yoshihide has said that the consumption tax hike will have little meaning if it leads to less tax revenue. Abenomics and the consumption tax hike plan have clearly reached an impasse.

As long as PM Abe refuses to accept the failure of Abenomics and withdraw this policy, people’s living conditions and the economy will not get back on a recovery track. People will not spend more if they have concern for their livelihoods. It is essential for PM Abe to squarely accept responsibility for his misgovernment and decide to cancel, not postpone, the plan to increase the consumption tax rate.

Ruling coalition politicians are citing the need for the delay of the consumption tax hike. Apparently, what they have in mind are the House of Councilors election slated for July and the House of Representatives election which may be held on the same day. It is totally intolerable for them to use the tax hike as a campaign strategy. They should not try to distract the public from the maladministration and deceive voters. The need is to hold PM Abe responsible for his failed policies, cancel the consumption tax hike plan, and bring down the Abe government.