Core consumer prices and exports fell in April, and manufacturing shrank at the fastest pace since Abe took office in 2012.
Advertisement
Meanwhile, the benchmark Nikkei 225 index was closed up +0.98 percent at 17,234.98, and the broader Topix index closed higher 1.01 percent to 1,379.80 points.
The world’s third-largest economy has been stuck in the doldrums despite massive monetary easing aimed at vanquishing deflation, which tends to discourage corporate investment and consumer spending.
“That could send a message that Abenomics has failed or Japan is heading for a fiscal danger zone and then it will harm Japanese government bonds’ credit ratings”, Mr. Sato said in an interview, referring to the prime minister’s growth program.
Previously Abe has pledged to raise the sales tax unless there was a financial crisis similar to the Lehman collapse or a major natural disaster.
In addition, Japan’s April overall household spending improved by -0.4 percent y/y, against markets consensus of -1.3 percent, from down -5.3 percent in March.
“There are some positive moves (in the global market), but emerging markets are still slowing down and weakness remains in the USA production, too”.
Abe warned at a G7 meeting that the global economy faces significant risks of another crisis.
“The government probably wants to avoid delivering a hammer blow to a fragile economy without seeing solid improvement at the fundamental level”, Margaret Yang of CMC Markets, said in a commentary.
Abe will also need to explain to voters how he plans to make up for the funding gap from the tax hike delay to October 2019, and keep pledges to beef up support for the elderly.
Both Aso and LDP Secretary-General Sadakazu Tanigaki openly criticized Abe’s plan to put off the hike for a second time. Odds are this hike never takes place at all.
Abe first delayed the sales tax rise and called a snap election for the lower house in December 2014, and speculation had simmered that he would do so again in tandem with the scheduled July election for the upper chamber.
Advertisement
As its reasons for submitting a non-confidence motion against the Abe Cabinet, the opposition camp cited the failure of the Abenomics economic policy package, the enactment of the security-related laws and the government’s handling of a money-for-favors scandal involving Akira Amari, former minister in charge of economic revitalization. But the Liberal Democrats’ strong majority means they lack the votes to get it passed.
