Japanese PM may call snap election next month: Reports

| | Updated on: Nov 12, 2014

Japanese Prime Minister Shinzo Abe could call a snap election for next month, two years early, with a plan to boost his support by delaying another scheduled tax hike, reports said today.

The first jump in sales tax, which came into effect in April, knocked a tentative revival off course and was blamed for a sharp fall in Japan’s second-quarter growth.

Commentators are converging around the idea that Abe will rule out a second rise, from eight per cent to 10, and seek a popular mandate that would help him vanquish mumblings of discontent within his own Liberal Democratic Party (LDP) and catch the still-battered Opposition unprepared.

“Calling a snap election within this year is among my options,” Abe told senior party members, the leading business daily Nikkei reported.

The LDP and its junior coalition party Komeito have begun preparations for a vote on either December 14 or 21, four other major national papers said.

The Tokyo Shimbun said Abe had told Komeito managers the election could be held before the year is out.

Abe has been coy in public, telling reporters in Beijing yesterday he had made no decisions, although he admitted to a television interviewer last week: “When asked the question, a prime minister has a set formula: ‘I’m not thinking of a snap election’.’’

Third quarter GDP data

Reports of an election come ahead of the release of third quarter GDP data on Monday, which the government has for a long time said will inform the decision on pressing ahead with the sales tax hike scheduled to take effect in October next year.

The mass-circulation Yomiuri Shimbun was among media saying today that the rise would be delayed by 18 months to April 2017.

Bank of Japan’s stimulus expansion

Last month’s surprise inflation of the Bank of Japan’s already-huge monetary easing programme, which sent a ripple of excitement through the markets and lit a rocket under stock prices, was also propitious.

The combined effect of this bounce and a feel-good delay in the tax rise would be a boon to Abe if he goes to the voters, and would strengthen his hand for difficult reforms, said Capital Economics in a note.

“A snap election could have the virtue of giving the government a stronger mandate as it struggles to push ahead with structural reform,” it said.

“But it would not be a long-term positive if coupled with a delay in the tax hike currently scheduled for October 2015.”

Published on November 12, 2014

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