While Prime Minister Shinzo Abe was away for the whole week on a series of diplomatic tours, it has been all but confirmed in media reports and in Nagatacho that he will postpone the second phase of the consumption tax hike next year and dissolve the Lower House as early as next week to hold a snap general election in December. Share prices already buoyed by the Bank of Japan's additional monetary stimulus continued to set new highs for the year on expectations that delaying the tax hike will shore up momentum of the economy, which has been losing steam since the 3-percentage point tax hike in April.
One wonders, however, if Abe's reported decision to call the election has an entirely legitimate reason. As far as media reports go, Abe and leaders of his Liberal Democratic Party think that they need to ask for the voters' judgment if they're going to forego the planned October 2015 hike in the consumption tax rate to 10 percent.
Still, the 2012 law that mandates the two-stage hikes in the consumption tax says that the government will make a final decision on whether to go ahead with the hike by assessing economic conditions. Members of the administration have repeated earlier that Abe will make the decision after reviewing the data on gross domestic product for the July-September period, the preliminary figures of which will be released on Monday. Though a delay would will require amending the tax law, it does not look like a decision that needs an endorsement by voters.