Japanese Prime Minister Shinzo Abe on Wednesday said he would postpone a sales tax increase planned for April 2017 amid sluggish consumer spending.
The tax hike to 10 per cent from 8 per cent was put off until October 2019, Abe said at a news conference.
"We decided to postpone the sales tax increase, which could hurt domestic demand," the premier said.
Japan's consumer spending has been weak especially since Abe's government raised the sales tax to 8 per cent from 5 per cent in April 2014 despite strong public opposition.
The second hike was first set for October 2015, but Abe decided to postpone it due to a slump in consumer spending after the first hike.
Household spending fell 2.9 per cent in 2014 and declined 2.3 per cent in 2015.
Abe said the government needs to avoid taking an economic risk amid the depressed state of emerging economies.
"Emerging economies such as China have been flagging," he said.
Abe's announcement came before elections for the House of Councillors, the upper legislative chamber, which he said Wednesday would be held on July 10.
The opposition has stepped up its criticism of Abe’s government, in particular on the economy. The postponement of the hike showed the failure of Abe’s economic policy, said Katsuya Okada, the leader of the main opposition Democratic Party.
The opposition camp submitted a no-confidence motion in the powerful lower house on Tuesday. It was voted down by Abe's ruling Liberal Democratic Party and junior coalition partner Komeito.