November 11, 2014 / 7:46 AM / 4 years ago

Japan PM Abe likely to delay sales-tax hike: government source

A shopper looks at sports wear in a sports clothing store at a shopping district in Tokyo October 27, 2014. REUTERS/Issei Kato

TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe is likely to delay a planned increase in the nation’s sales tax, judging that the economic recovery remains too fragile to weather a further blow, a government official close to Abe’s office said on Tuesday.

The comment comes as momentum appears to be building for Abe to delay the painful measure and call a snap election, with major parties scrambling to prepare for a possible campaign.

“There’s a high probability that the consumption-tax hike will be delayed,” the person told Reuters. “It looks like the government will begin full-fledged consideration of this.”

Abe raised the tax to 8 percent from 5 percent in April, sending the world’s third-biggest economy into its deepest contraction since the global financial crisis in the second quarter.

He is to decide after seeing gross domestic product data on Monday whether the economy is strong enough for the planned second stage of fiscal reform - raising the tax again to 10 percent next October. Some of Abe’s advisers have called for him to delay the increase for 18 months to April 2017.

Speculation of a tax-hike delay drive the benchmark Nikkei share average .N225 up 2.1 percent on Tuesday to a seven-year high.

Reporting by Yoshifumi Takemoto; Writing by William Mallard; Editing by Chris Gallagher

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