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Abe calls snap Japan poll, delays tax hike

Prime Minister Shinzo Abe told his party on Tuesday he was calling a snap election and delaying a sales tax rise after figures showed Japan was in a recession.

[TOKYO] Prime Minister Shinzo Abe told his party on Tuesday he was calling a snap election and delaying a sales tax rise after figures showed Japan was in a recession.

Less than two years after he swept to power pledging to reinvigorate the flagging economy, Mr Abe will go to the polls - probably in the middle of next month - telling voters that more needs to be done to fix years of growth-sapping price declines.

"Prime Minister Abe expressed his intention at an extraordinary board meeting of his Liberal Democratic Party that he would dissolve the House of Representatives," Jiji Press said.

Mr Abe had earlier told a meeting of lawmakers and officials from his junior coalition partner Komeito: "We are finally taking the opportunity to get rid of deflation." The last 24 months have seen two of the so-called "three arrows" of "Abenomics" fired - massive fiscal stimulus and a flood of easy money. A third "arrow" of structural reforms remains stuck in the quiver, a victim of the vested interests it is intended to undermine.

At its heart, Abenomics is intended to push prices up and get Japanese shoppers spending, with the aim of generating a self-reinforcing recovery as companies employ more people to meet growing demand.

The measures have sent the yen plunging, pushing up the cost of imports, including the fossil fuels used to power the country.

That stretched consumers - 60 per cent of the economy - who were then walloped again in April by a rise in sales tax from 5.0 to 8.0 per cent, resulting in two consecutive quarters of contraction.

A growing clamour has been heard over recent months to suspend part two of the tax rise, to 10.0 per cent, which is due for October.

"I will judge the consumption tax calmly," Mr Abe said. "People's life won't get better without economic growth."

Ignoring criticism that he is currying favour with voters, Mr Abe is expected to order his ministers to compile a fresh economic stimulus package, including measures to ease the impact of rising import prices.

The media consensus is that the election will be held on Sunday, December 14, with the lower house to be formally dissolved later this week.

"Abenomics is at a crucial point," Sadakazu Tanigaki, secretary-general of Mr Abe's Liberal Democratic Party, told reporters after attending a meeting of LDP senior officials.

"I told them: 'Let's work together based on decisions by the prime minister'," Mr Tanigaki said.

Opposition parties, who are still in disarray after their 2012 drubbing, will hope to capitalise on the difficulties faced by voters whose wages are at a standstill while prices rise.

"It is clear that Abenomics has not had any positive impact on people's life at all," said Banri Kaieda, head of the largest opposition Democratic Party of Japan.

Yoshiki Yamashita, a Communist Party lawmaker, said "Abenomics merely expanded the gap" between the haves and the have-nots.

But commentators across the spectrum agree that Mr Abe, who enjoys approval ratings of around 50 per cent, is likely to stroll home in the popular vote. They point out that the premier's real target is rivals within his own fractious LDP.

The thinking goes that as he faces a three-yearly party leadership election next September, he could stamp his authority over the grouping by resetting the clock now.

"I suppose Prime Minister Abe concluded that it's the best timing to extend his premiership," said Shinichi Nishikawa, professor of politics at Meiji University in Tokyo.

"But the prospects for his decision are still uncertain," Mr Nishikawa said. "It may come at a price, depending upon election results." A new mandate would bolster Mr Abe's case for pushing ahead with the re-starting of nuclear reactors - an unpopular idea in a nation scarred by the 2011 Fukushima disaster.

It would also strengthen Mr Abe's hand on pet issues like reforming Japan's view of its 20th century warmongering, which he and other right-wingers say is masochistic.