Japan factory output edges up as PM mulls tax hike delay

Japan factory output edges up as PM mulls tax hike delay

TOKYO - Japan's industrial production edged up in April, data showed Tuesday, despite factory shutdowns sparked by a pair of deadly earthquakes that rocked southern Kyushu.

Official figures also showed household spending remained tepid, as Prime Minister Shinzo Abe mulls whether to delay a sales tax hike over fears it could damage the fragile economy.

Inflation data last week showed consumer prices fell for a second straight month, the latest in a series of blows for the premier's faltering growth plan, dubbed "Abenomics".

Abe reportedly intends to delay a rise in sales tax, from eight to 10 per cent, until October 2019 instead of pushing it through in April next year as planned.

The premier is expected to make an official announcement on Wednesday.

The higher levy is seen as crucial for helping to pay down Japan's debt load, one of the largest among rich nations.

But a consumption tax rise in 2014 -- Japan's first since the late nineties -- pushed the world's number three economy into a brief recession.

On Tuesday, data showed Japan's factory output in April edged up by 0.3 per cent from a month earlier, beating market forecasts for a 1.5 per cent decline.

Earthquakes in southern Japan last month forced the temporary closure of some regional factories, including those operated by Toyota and other major firms.

The world's top automaker saw its domestic production fall 20 per cent last month.

Separate data, also released Tuesday, showed Japan's household spending shrank 0.4 per cent in April, although that was a smaller decline than a month earlier.

The job market remained tight, with the unemployment rate at 3.2 per cent.

The figures come several days after G7 talks hosted by Japan wrapped up with Abe warning that the world economy risks a crisis on the scale of the 2008 collapse of Lehman Brothers.

Abe has said his government will only push back the tax hike in the event of "a grave situation" as disastrous as Lehman's disintegration at the start of the global financial crisis or a major earthquake.

Many observers -- and some of Abe's G7 counterparts -- were not convinced the global economy was facing such a severe shock, seeing Abe's comment as instead intended to justify delaying the tax hike.

"The risk is definitely not on the scale of Lehman Brothers' collapse," said Shunpei Fujita, an economist at Mitsubishi UFJ Research and Consulting.

"But it is true that the Japanese economy is weak, and a sales tax hike would surely slow it further," he added.

Critics of delaying the levy hike say Japan must tame its soaring debts and figure out new ways to pay for the ballooning cost of welfare as the population ages.

Government coffers are deep in the red, with public debt standing at twice the size of the economy -- the worst among industrialised economies.

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