Prime Minister Shinzo Abe has announced he will postpone a sales tax hike planned for next year to help nurse along Japan's faltering economic recovery.

Abe announced the decision to push the tax hike back to October 2019 from the earlier plan to raise it in April 2017 on Wednesday. The tax is due to rise to 10 percent from 8 percent.

Japan, the world's third-largest economy, has seen its growth stall as the population shrinks and ages and manufacturers shift production overseas to faster growing markets.

Abe's strategy of using extreme monetary easing to vanquish deflation has made only limited progress. He said the global economic outlook was too uncertain to risk another economic downturn by raising the tax. The last increase, in 2014, put the economy into recession.