(Versions in 日本語)
Japan’s GDP declined by almost 7 percent in the second quarter, more than many had forecast including us here at the IMF. Many cite the increase in the sales tax this April for this decline. But that is not the full story.
Yes, it is true that consumer responses to major tax increases are difficult to predict, and large spending swings are not unusual. We see this pattern in many countries (see chart) including Germany’s 2007 VAT increase, which had a short-lived impact.
Filed under: Advanced Economies, Asia, Economic outlook, Economic research, Employment, Finance, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: Abenomics, Bank of Japan, consumption tax, Germany, inflation, Japan, labor market, sales tax, structural reform, VAT | Leave a comment »