Japan leader gambles on sales tax hike

Japan leader gambles on sales tax hike

TOKYO - Japanese premier Shinzo Abe's long-awaited decision this week on whether to hike sales taxes is a major political gamble that proved career-ending for his predecessors, analysts say.

Since sweeping December elections on a ticket to kickstart the world's third-largest economy, the prime minister launched an unprecedented policy blitz - dubbed Abenomics - which appears to be taking hold as the economy expands while the stock market roars.

Abe underscored that early success with an upbeat speech to the New York Stock Exchange last week, calling for investors to get on board with his bid to regain Japan's one-time economic glory.

"Japan, as the third-largest economic powerhouse on the planet, will be back in full force again," he promised.

But his decision on hiking the tax levy, seen as crucial to chopping Japan's massive national debt, threatens not only to sink Abe's growth plans; it could also dim his popularity with voters.

'Biggest political decision'

Few, however, see the 59-year-old as having much choice, given the size of the country's national debt, proportionately the worst in the rich world at more than twice the size of the economy.

The International Monetary Fund, among others, have been calling on Tokyo to fix its books, after debt agencies cut their ratings on Japan's credit.

"This is Abe's biggest political decision since he took office," said Tomoaki Iwai, professor of politics at Tokyo's Nihon University.

"Japan is in the middle of an epic experiment and his decision is a crucial test of Abenomics."

Speculation has been building for weeks ahead of the announcement on Tuesday, which will come after the Bank of Japan publishes its Tankan business confidence survey.

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