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Economic Brief

Sept. 25, 2019

Richmond Fed Researchers Analyze Japan’s Rising Consumption Tax

With Japan on the verge of another consumption tax increase, the Richmond Fed’s latest Economic Brief highlights new evidence that a similar tax hike in 1997 coincided with a persistent decline in Japan’s growth rate for household consumption.

Japan plans to raise its national consumption tax from 8 percent to 10 percent on October 1. Some commentators and economists have blamed previous consumption tax increases for causing recessions in 1997 and 2014, but little statistical analysis has been published to support or refute such claims. The authors of the brief concede that Japan’s high levels of public debt leave no easy choices for policymakers, but they recommend further study of the relationship between tax policy and consumption dynamics before implementing additional consumption tax increases.

The Richmond Fed’s Economic Brief series provides web-exclusive essays on economic issues and trends. Sign up to receive an email notification when a new essay is posted.


As part of our nation’s central bank, the Richmond Fed is one of 12 regional Reserve Banks working together with the Board of Governors to support a healthy economy and deliver on our mission to foster economic stability and strength. We connect with community and business leaders across the Fifth Federal Reserve District — including the Carolinas, District of Columbia, Maryland, Virginia, and most of West Virginia — to monitor economic conditions, address issues facing our communities, and share this information with monetary and financial policymakers. We also work with banks to ensure they are operating safely and soundly, supply financial institutions with currency that’s fit for distribution, and provide a safe and efficient way to transfer funds through our nation’s payments system.

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