Japanese PM, FinMin agree to delay planned sales tax hike

Japanese Prime Minister Shinzo Abe and Finance Minister Taro Aso has agreed to delay a planned sales tax hike and make the postponed tax change unconditional on certain economic situation, local report quoted government officials as saying Tuesday.

Aso was insisting to carry out the second round consumption tax hike as planned in October 2015 from 8 percent to 10 percent last week as increasing tax revenue could help address Japan's severe fiscal deficit.

The two reached the agreement on their return flight from a summit of the Group of 20 in Australia on Monday, Japan's Kyodo News quoted the officials as saying.

Abe explained his intention to postpone the tax hike for economic woes, while Aso called for removing an existing clause making the tax hike conditional, said the report.

According to the clause in an annex to the law to raise the consumption tax, it allows the government to stop the hike depending on economic conditions and has become a legal ground for Abe's plan to delay the hike.

Abe is expected to announce the postponement and call a snap election on Dec. 14 late Tuesday, local reports cited ruling coalition official as reporting.

The Japanese government released the economy data for the third quarter on Monday which said real gross domestic product shrank 0. 4 percent in the reporting quarter for the second straight of decline, meaning Japan's economy slipped in a technical recession.

Japan's economy contracted an annualized real 7.1 percent in the second quarter of 2014 in the wake of the first round of tax change on April 1 from 5 percent to 8 percent.

The newly released preliminary data is a key reference for Abe to decide whether to go ahead with the planned sales tax hike next year.

By calling a halfway poll, analysts said Abe is trying to take the advantages of opposition's unpreparedness to win the vote to extend his rule two more years to 2018 so as to better pass unpopular bills related to the collective self-defense.

The second consumption tax hike is expected to be postponed until April 2017 when there is no general election, according to local reports.

Abe is also expected to ask his ministers soon to compile a supplementary budget of around 3 trillion yen for the current fiscal year ending next March to revitalize the economy, said Kyodo.

The government is prepared to discuss details of its upcoming economic stimulus package at Tuesday's meeting of the Council on Economic and Fiscal Policy, said the report.