With Japan in recession, Abe calls elections in bid to delay tax hike

With his nation in an unexpected recession, Japanese Prime Minister Shinzo Abe on Tuesday called early parliamentary elections to seek public backing for a delay in a scheduled tax increase that could worsen economic conditions.

“I’ve made up my mind that I should seek the mandate of the people without delay,” Abe said, according to a translation by Japanese broadcaster NHK of his speech to the nation.

If his governing coalition fails to win a majority in the elections, Abe said he would step down as prime minister.

The announcement came a day after Japan reported that its economy, the third-largest in the world, surprisingly shrank at a 1.6% annual rate in the third quarter of the year. It was the second straight quarterly contraction, which economists say constitutes a recession.

It was troubling news for a global economy struggling again in the wake of the Great Recession and raised concerns in the U.S. because Japan is the nation’s fourth-largest trading partner.

Economic growth in Japan had contracted at a 7.3% annual rate in the second quarter after the nation’s consumption tax rose to 8% from 5% in April.

The increase was part of a strategy, known as Abenomics, to boost growth and reduce public debt in Japan after two decades of economic troubles.

Many economists believe the sales tax increase triggered the recession, Japan’s fourth since the 2008 financial crisis.

With the tax set to rise to 10% in October 2015, Abe said he would dissolve the lower house of Japan’s parliament on Friday and then hold elections to determine if voters want to delay the tax increase.

“I would like to ask people to judge whether the consumption tax hike to 10% should be delayed by 18 months and instead should be carried out in April 2017 without any conditions,” Abe said.

“I would also like to ask people to judge whether we should push forward with our economic policy and growth strategy which we’ve been proceeding with,” he said.

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