Econintersect: Only days after the U.S. GDP data took a surprise jump Japan went the other way. The previous estimate of 1.9% growth year-over-year for the third quarter has been cut to only 1.1%. If one doesn’t quibble over 0.15 points, economic growth for Japan was just cut in half. This decline is especially damaging to the Premiere Shinzo Abe government’s stimulative fiscal and monetary plan to shock Japan out of decades of deflation – because if follows second quarter growth of nearly 4%. Sustainability of the growth plan will now be subjected to some serious questioning.
Abenomics includes a plan to sharply increase a consumption tax in less than four months from now. With the economy possibly faltering that could put a severe damper on any hopes to continue economic growth. The entire strategy has been questioned regarding consistency and now those contradictions will have to be considered in the most negative of situations. Increasing taxes in a declining economy is not considered good policy by many economists.
Sources:
- Japan’s economy looks weaker after GDP revision (Charles Riley, CNNMoney, 08 December 2013)
- Japan: Conflicted Policy (GEI News, 04 July 2013)