Japanese Taxes

Japan Parliament Passes Sales-Tax Increase – WSJ.com.

Japan has many options to cut its budget deficit. Since WWII, Japan has relied on an export-driven growth model. Taxing internal consumption is consistent with this model.

By taxing consumption, the Japanese government is raising the price of consumption. Therefore, Japanese consumer will purchase less goods at higher prices. This means that they will consume less imports and that they will have more goods available to export.

The problem with an export-driven growth model is that every country in the world cannot employ it. The world should have a zero tradeĀ  balance. When every country alters its system to encourage exports in the face of sluggish world growth, it usually leads to trade and currency wars.

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