JAPAN’S economy unexpectedly slipped into recession in the third quarter, setting the stage for Prime Minister Shinzo Abe to delay an unpopular sales tax hike and call a snap election half-way through his term.

    Gross domestic product (GDP) fell at an annualized 1.6 percent pace in July-September after it plunged 7.3 percent in the second quarter following a rise in the national sales tax, which clobbered consumer spending.

    The world’s third-largest economy had been forecast to rebound by 2.1 percent in the third quarter, but consumption and exports remained weak, saddling companies with huge inventories to work off.

    Abe had said he would look at the data when deciding whether to press ahead with a second increase in the sales tax to 10 percent in October next year, as part of a plan to curb Japan’s huge public debt, the worst among advanced nations.

    Japanese media have said the prime minister, who returns from an Asia tour yesterday, could announce his decision to delay the hike as early as today and state his intention to call an election for parliament’s lower house, which ruling party lawmakers expect to be held Dec. 14.

    An economic adviser to Abe termed the economic slide “shocking,” and urged the government to consider steps to support the economy.

    “This is absolutely not a situation in which we should be debating an increase in the consumption tax,” Etsuro Honda, a University of Shizuoka professor and a prominent outside architect of Abe’s reflationary policies, told Reuters.

    No election for parliament’s powerful lower house need be held until late 2016, but political insiders say Abe wants to lock in his mandate while his ratings are still relatively robust, helping him push ahead with economic and other policies such a controversial shift away from Japan’s post-war pacifism.

    Facing a divided and weak opposition, Abe’s Liberal Democratic Party (LDP) is expected to keep its majority in the lower house, but it could well lose seats. As election talk heated up last week, a poll by NHK public TV found that Abe’s voter support had fallen 8 percentage points to 44 percent from a month earlier.

    A senior LDP lawmaker said the data made Abe’s decision to postpone the tax hike certain and that he expected the premier to call a snap poll, arguing that his “Abenomics” strategy to re-energize the economy was working but needed more time.(SD-Agencies)