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Japanese Prime Minister Shinzo Abe's claim that a Lehman-esque crisis loomed was nothing more than political maneuvering as he looked for an excuse to delay a consumption tax hike, skeptical analysts told CNBC.
Abe told world leaders at the Group of Seven (G-7) summit on Thursday that the global economy faced its toughest year since 2008, according to a Nikkei report. He justified the bold remark by pointing to data that showed commodities prices had tanked 55 percent since 2014, the same margin as prior to the global financial crisis that started with the collapse of U.S. investment bank Lehman Brothers.
He repeated those views on Friday, saying there was a risk of the global economy falling into crisis if appropriate policy responses weren't made, Reuters reported.
"This is part of Abe's plan to postpone the sales tax," explained Scott Seaman, Asia senior analyst at political consultancy Eurasia Group. "They [Japanese officials] have been saying for a long time that they aren't prepared to postpone the tax yet again unless they encounter a Lehman-type shock. That was the point Abe made."
Abe also announced on Friday that he would make a decision regarding the tax before July's Upper House election.
The consumption levy, or sales tax, is part of Abe's plan to pare the nation's bulging debt pile, currently equal more than 200 percent of gross domestic product (GDP). The first move came in April 2013, when the sales tax was increased from 5 percent to 8 percent. But that plunged the economy into a two-quarter recession as household spending slumped.
Having already postponed the second hike—which would bring the levy to 10 percent—last October, Abe has insisted the increase would go ahead in April 2017 despite fears it would tip the struggling economy into recession again.
Tobias Harris, analyst at Teneo Intelligence, said that understanding Abe's G-7 remarks required a look back at his previous comments on the tax.
"His argument [on how commodity prices are a portent of a 2008-style global crisis] is a bit mystifying, until you realize that he has repeatedly said that the only reason he would delay the consumption tax hike scheduled for 2017 would be in the event of a large natural disaster or a 2008-style crisis."
Abe's use of hot-button term like Lehman was deliberate and intended mainly for a domestic audience, not for his G-7 counterparts, Harris added.
Indeed, many commentators said there was little evidence of an impending Lehman-like economic shock.
"That is too melodramatic," John Roos, U.S. ambassador to Japan from 2009-2013 and founding partner at Geodesic Capital, said. "There are obviously economic challenges in the world but I don't see that type of crisis in the offing."
The claim is obviously exaggerated, agreed Marcel Thielant, Japan economist at Capital Economics. "We don't see anything like that on the horizon. It's a political statement; he wants to set the groundwork for a [tax] delay." He expected Abe to delay the hike for a year or two.
Analysts have widely noted that Abe was aware the economy wasn't strong enough for another hike, but announcing yet another delay would hurt his public image and invite rebuke from critics within his ruling Liberal Democratic Party as well as technocrats at the Ministry of Finance. Hence, the prime minister has resorted to political games to justify a delay, they said.
In March, Abe held high-profile meetings with Noble prize-winning economists Joseph Stiglitz and Paul Krugman, both of whom advocated a delay, according to reports. Thursday's G7 statement appeared to be his most recent tactic to divert blame for a delay.
So, will Abe's games work?
The tactics were likely to provide him with enough political cover to argue for a delay, Harris said, adding that it could also give him enough leverage to introduce a new fiscal stimulus package.
The government is widely expected to announce fiscal measures by the end of May to underpin Abe's newly-revamped signature economic platform, "Abenomics 2.0," which could include raising nominal GDP to 600 trillion yen ($5.4 trillion), from 500 trillion yen currently, according to HSBC.
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