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Tuesday, June 12, 2012

IMF warns Japan regarding fiscal policy

A noteworthy development today reported by Reuters is  IMF: Japan must raise sales tax to show fiscal commitment | Reuters

"The International Monetary Fund urged the Japanese government on Tuesday to raise the country's sales tax and reform its welfare system to demonstrate a commitment to fiscal reform."

Japan's parliament is considering a plan to double sales tax rates by 2015.  Similar proposals over the years since the end of the country's boom in the early 1990's have generally been rejected as being likely to harm domestic consumption.  The same issue is still relevant, but the need for more tax revenue is more pressing now.

This fiscal action would be deflationary, at a time when the country is arguably already experiencing deflation.