Jun 28, 2017 (Reuters) - Japanese premier Shinzo Abe is looking to quietly ditch a pledge to balance the budget by fiscal 2020 in favor of a looser debt-to-GDP ratio target, a move that gives him a free hand to delay again an unpopular sales tax hike, government sources say.
Any fiscal slippage would mean Japan keeping its money printing presses running longer, and would break a commitment to G20 countries.
That could risk provoking fresh accusations of currency manipulation from the United States and other G20 countries if they saw Japan's move as a further attempt to keep the yen weak.
Abe also has to be careful of the potential market reaction. Any reduction in the commitment to whittling down a public debt, that at twice the size of the economy is the worst among major economies, could risk damaging investor confidence in Japan.
While Abe is unlikely to have decided yet on whether to proceed with a scheduled sales tax hike in 2019, there are plenty of reasons to postpone it, the government sources say.
Abe's aides say the premier, who twice delayed a hike to 10 percent after an increase to 8 percent in 2014 pushed Japan to the verge of recession, won't risk cooling the economy again.
"I think the prime minister understands that putting off the sales tax hike is in the best interest of fiscal consolidation," said Satoshi Fujii, a special adviser to Abe.
IMF BLESSING
Having seen his support slump from a series of scandals, Abe must decide whether to move ahead with the tax hike by mid-next year - around the time he could call a general election that must be held by late 2018.
But, even the International Monetary Fund said last week that sustaining economic growth should take priority over consolidating the budget for now.
