How much damage would a delay in the tax hike do?

Recent comments by PM Abe suggest that next year’s scheduled hike in the sales tax might be delayed. Concerns about the economic impact of a further tax hike are understandable given the weakness of recent data. But the threat of a short-lived period of weakness should not be reason to abandon a key element of Abe’s plan to transform the long-run prospects of the economy. We therefore still think that the government will press ahead with the tax hike, but PM Abe’s remarks have only raised the importance of the Q3 GDP figures, due on 16th November.