Japan\\\'s economy consumptive

Was the decision to raise a key tax this year a big mistake? For years, the political consensus has been that Japan’s consumption (ie, value-added) tax needs to go up in order to control a ballooning public debt. In April the government of Shinzo Abe carried out a decision made by the previous government and lifted the tax from 5% to 8%. The government intends to raise the consumption tax again, to 10% in October 2015. Towards the end of this year, Abe must decide whether to go ahead with that plan or postpone it on the grounds of a weak economy. The dilemma has set off a battle inside his Liberal Democratic Party (LDP) and among his close advisers. On the one hand, opponents of tax rises say their dire predictions have come true. And many in the LDP worry that another unpopular increase could spell trouble in local elections in the spring. On the other hand, for a country with gross public borrowing at close to 240% of GDP, fiscal rectitude is paramount. The finance ministry has long advocated a higher consumption tax. Probably, the prime minister will stop short of defying the powerful ministry. A loss of political nerve might raise doubts about Abe’s commitment to his broader economic programme, which is intended to impress with its boldness. Further, says Robert Feldman of Morgan Stanley in Tokyo, it should be easier to take steps to guard against an economic slump than to counter the risk of a bond-market crisis, according to economist.com