Shinzo Abe said he had decided to postpone a second tax hike until 2017 after the economy slumped into recession following a tax increase in April, showing it is too weak for another increase.
He said he will dissolve parliament on Friday and the election is scheduled for mid-December.
The ruling Liberal Democrats have a solid majority and hope to further consolidate their power at a time when opposition parties are weak and in disarray. Delaying the tax move will slow Japan’s work on repairing its tattered public finances, but Mr Abe said the risk to the economy was a bigger threat.
Mr Abe said he would step down if his strategy to revive the ailing economy falls flat.
“I’ve been pondering this problem,” he said. “Even if we raise the tax as planned, tax revenue will not increase if the economy does not recover.”
He said public approval was needed to ensure the success of his Abenomics policies of extreme monetary easing, heavy government spending and economic reforms.
“I need to hear the voice of the people,” Mr Abe said. “I will step down if we fail to keep our majority because that would mean our Abenomics is rejected.”
He described his strategies as the “only path” for Japan to escape its economic malaise. “Some people say Abenomics has failed or it’s not performing well,” he said. “But what else can we do? I have yet to hear of a better idea.”
Mr Abe secured a rare second term as prime minister, having stepped down just a year into his rocky first term in office in 2006-2007. His support ratings started out high as share prices surged in early 2013 but have fallen recently. Parliament got bogged down in squabbles over campaign finance scandals that led to resignations of two of his cabinet ministers within weeks of an early September reshuffle.