Thursday, August 15, 2013

Abenomics and consumption tax

The government has published that Japan's GDP growth rate is 2.6% in the second quarter in 2013.
For some analysts, it is a disappointing result.

Quartz: Japan’s sagging growth reveals a few hitches in the Abenomics plan

The economic state in Japan is improving due to Abenomics, the policy of the Prime Minister. Mr. Abe describes there is three arrows composed of Abenomics. They are, massive quantitative easing, fiscal policies to stimulate demand, and growth strategy. Among them, the first arrow made a great success. The Yen weakened and the mean stock pile in Japan rapidly increased. Some investors were much delighted. However, the growth strategy has not found its goal, as far as I understand. To begin with, it is quite difficult to show the right way for sustainable economic growth in the modern era.

After all, Abenomics equips an illusionary gold clothes. Indeed, fool's gold is also gold. And the economy is influenced on fantastic expectation to some extent. I think it is the time to reform the organization in Japan which keep the society from real growth.

One of the concerns that Abe administration is wondering about is the consumption tax. The past Noda administration has decided to raise the sales tax rate gradually. The ruling liberal democratic party (LDP), which Mr. Abe belongs to, accepted this policy. The LDP planned to raise the consumption tax before. Therefore there is no reason to hesitate to raise the tax. The amount of debt in Japan has reached 1 trillion Yen.

The Japan Times: A first: Nation’s debt tops ¥1 quadrillion

However, some politicians and economists are opposed to raising the tax. They claim that raising the tax will cause the reduction of motivation of consumers, and it leads to deflation much more.

It may be a rational criticism. The opinions of economists are varied. Nonetheless, I think a consumption tax should be raised. The sales tax rate has to be up, sooner or later. If the decision is retracted, reputation of Japan in the international relationship would be damaged. I am afraid that undecidable politics in Japan will be branded.

No comments:

Post a Comment