The Abe Cabinet of Japan has reportedly decided to raise the consumption tax rate from 5% to 8% in the next spring.
It was first introduced in 1989 at 3%, and then the Hashimoto Cabinet increased to 5% in 1997.
With this increase to 8%, the consumers' price in Japan is expected to be hiked by 2% while the Bank of Japan is taking financial measures to increase prices by 2%; thus it is forecast that Japan will experience a 4% increase in prices in the next year.
It can be regarded as good news for the Japanese economy suffering 15-year-long deflation. But if businesses should not increase salaries and wages, the tax rate increase will simply put more burdens on consumers and workers. Consequently, the deeply-rooted deflation in Japan might further continue.
So, Prime Minister Abe has taken a big gamble.
Though a national election is not expected to be conducted till 2016, the Abe Cabinet and the ruling party LDP must face a crisis if an approval rating of PM Abe should fall drastically due to this tax hike. As the Japanese politics is based on the parliamentary cabinet system, complaints to a Government policy are directed specifically to national Diet members of a ruling party who can force a prime minister to resign by denying his position as party head.
Accordingly, PM Shinzo Abe can face his own crisis at any moment depending on situations after bringing the tax rate increase bill into effect, though his approval rating has risen by 10% to a 60% level recently due to his success in inviting 2020 Olympics to Tokyo.
Parties concerned think that Shinzo Abe can occupy position of the prime minister till 2016 as the first longtime ruler of Japan since Junichiro Koizumi while six prime ministers after Koizumi, who voluntarily stepped down from the premiership in 2006, could hang on to the premiership only less than one and a half years.
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