Abe puts off tax hike, calls snap vote

Japan's Prime Minister Shinzo Abe called a snap election for December and put off a sales tax hike planned for next year, vowing on Tuesday to step down if his strategy to revive the ailing economy falls flat.

Despite Abe's aggressive revival policies to end two decades of stagnation, the Japanese economy slipped into a recession last quarter after a tax increase in April crushed consumer and business spending. That prompted Abe and other officials to reconsider a second hike planned for October next year.

"I've been pondering this problem," Abe told a news conference. "Even if we raise the tax as planned, tax revenue will not increase if the economy does not recover."

Abe said he will dissolve parliament on Friday, setting an election for mid-December to seek public approval for his decision, which he said was needed to ensure the success of his "Abenomics" policies of extreme monetary easing, heavy government spending and economic reforms.

"I need to hear the voice of the people," Abe said. "I will step down if we fail to keep our majority because that would mean our Abenomics is rejected."

Delaying the tax hike will slow Japan's work on repairing its tattered public finances. But Abe said the risk to the world's third-largest economy was a bigger threat.

Fresh elections may seem a puzzling decision given the bad news on the economy. But the Liberal Democrats have a solid majority and hope to further consolidate their power at a time when opposition parties are weak and in disarray.

Abe described his strategies as the "only path" for Japan to escape its economic malaise.

"Some people say Abenomics has failed or it's not performing well," he said. "But what else can we do. I have yet to hear of a better idea."

By dissolving parliament for an election, Abe can clear the slate and once again reshuffle his Cabinet, said Michael Cucek, a Tokyo-based analyst and fellow at Temple University Japan.