Prime Minister Shinzo Abe’s decision to postpone the second phase of the consumption tax hike, citing a negative impact on the economy, which has been losing steam since the tax rate was hiked to 8 percent in April, may be popular with much of the electorate.
He might have a point in saying that the purpose of the tax hike — to increase the government’s revenue — would be lost if the additional levy causes a further slump in consumer spending and derails economic growth, thereby reducing tax revenue. None of the opposition parties opposes the decision not to raise the tax again next year. There is the argument that tax revenue would increase if the economy grows, people spend more and business earnings rise.
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