I Can Resist the I-Told-You-So No Longer

Japan’s massive stimulus program — equal to nearly a quarter of the country’s GDP — wasn’t enough to overcome the effects of a modest sales tax increase:


A sales tax increase this spring drove Japan’s economy into its biggest contraction since the March 2011 earthquake and tsunami, official data showed on Wednesday.

The April 1 tax increase took a heavy toll on household spending, shrinking the Japanese economy, the world’s third-largest, after the United States and China, at an annualized rate of 6.8 percent from April through June, and wiping out the 6.1 percent growth of the January-March quarter, when consumers shopped heavily to avoid the higher tax.

Seeing the slump as temporary, however, the Bank of Japan said it was convinced that the economy was on course for a moderate recovery and that it had no plans to expand stimulus any time soon.

Say it with me now: You can’t spend your way to prosperity.


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