Japan calls early parliamentary elections

Japanese Prime Minister Shinzo Abe said Tuesday he will postpone a controversial sales tax rise scheduled for next October and call a parliamentary election two years earlier than planned.

The announcement was made at an executive meeting of Abe's Liberal Democratic Party and comes as Japan's economy recently slipped back into recession.

Japanese broadcaster NHK said Abe told reporters he will dissolve parliament on Friday.

The early election, to seek a public mandate for his decision to delay the unpopular sales tax until 2017, will be held in mid-December.

Japanese law stipulates the sales tax needed to be raised from the current 8% to 10% by next October if economic conditions permit, NHK said.

Japan emerged from its last recession in late 2012, just as Abe took office pledging to restore the country's economic vigor.

Abe wants a renewed mandate for his "Abenomics" policies aimed at revitalizing the economy through cash injections by the central bank, strong public spending and reforms intended to improve the country's waning economic competitiveness.

Speaking at a televised news conference on Tuesday, Abe said: "I am aware that critics say 'Abenomics' is a failure and not working but I have not heard one concrete idea what to do instead. ... Are our economic policies mistaken, or correct? Is there another option?" Reuters reported.

"This is the only way to end deflation and revive the economy," he said.

On Monday, Japan said its economy contracted at a real annual rate of 1.6% in July-September, a second straight quarterly decline that returned the country to technical recession.

Janet Hunter, professor of economic history at the London School of Economics, said: "Japan has had a sluggish economy for the last 20 years. One of the battles that Japanese governments have had to face is to get the country out of this.

"My guess is that the prime minister is going for a snap election because he wants people to try and confirm he's on the right track."

The Liberal Democrat Party has a solid majority and hopes to further consolidate its power at a time when opposition parties are weak and in disarray.

Tax increases are crucial for getting Japan's battered government finances into better shape.

After many years of deficit spending, the total public debt is more than twice the size of the economy and the largest among developed nations.

Shares in Tokyo earlier jumped Tuesday on expectations that the sales tax hike would be postponed.

Contributing: The Associated Press