Economists question Japan's planned consumption tax hike — Eri Sugiura

But the impact of the tax hike on the economy remains uncertain, and numerous experts have already said it may lead to further stagnation. The country is in the middle of an economic downturn, they say, and the tax increase will only worsen low inflation.
Some U.S. scholars agree. "Taxes are for subtraction and to remove spending power from someone," said Stephanie Kelton, a professor of economics and public policy at Stony Brook University. Kelton, a leading MMT advocate, criticized the planned tax increase in a speech given in Tokyo last week. "If you are not currently experiencing an inflation problem -- and you are not -- then [raising] the consumption tax does not make economic sense to me."

MMT encourages government to run a deficit and print money as long as it does not overheat the economy. If inflation begins to emerge, it can be mitigated by cutting government spending and increasing taxes. But other than that, the government should spend on economic stimulus programs to increase employment as much as possible.

Nikkei Asian Review
Economists question Japan's planned consumption tax hike

Eri Sugiura, Nikkei staff writer