Will the Increase in the Consumption Tax Derail Abenomics?

But it comes at an inopportune moment for Tokyo, which hopes Japan’s cautious consumers continue to spend after more than 15 years of debilitating deflation.

History isn’t reassuring. In April 1997, when the government last raised the sales tax, to 5% from 3%, consumption took a dive and—along with the effects of the Asian financial crisis—pushed Japan into deflation and a recession that lasted more than 18 months.

And shows a version of the chart below:


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About the Author

Marcus Nunes
João Marcus Marinho Nunes is a partner of Phynance Estratégias Quantitativas e Investimentos and a professor of Economics at Fundação Getúlio Vargas in São Paulo, Brazil. He also blogs here: http://thefaintofheart.wordpress.com/

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