Thursday, June 2, 2016

Japan Delays Fiscal Reforms and Sales Tax Increase

Japanese consumers rushed out to buy 'stuff' ahead of the expected sales tax increase. Their spending spree, a surge in consumer spending, boosted economic growth by pulling future sales into the present.

Abe's announcement that fiscal reforms will be placed on the back burner - including a delay in the sales tax increase by two-and-a-half years not only ends the spending spree but also favors less spending as the global economy enters full blown liquidation in 2017. This will spell trouble for the Japanese economy which is already showing signs of weakness.

Today's announcement provides yet another example of how central planning of the economy, the assumed control of multi-dimensional system called the global economy through simple, domestic policies and the management of expectations, works only in the minds of politicians and the public that blindly follows them.

Headline: Japan PM delays sales tax hike, puts fiscal reform on back burner

Japanese Prime Minister Shinzo Abe announced on Wednesday his widely expected decision to delay a scheduled sales tax increase by two-and-a-half years, putting his plans for fiscal reforms on the back burner due to growing signs of weakness in the economy.

While the decision may help Abe win votes at an upper house election on July 10, it could fan doubts about his plans to curb Japan's huge public debt and fund ballooning social welfare costs of a fast-ageing population.



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