Matthew C Klein, Columnist

When a Tax Increase Is Bad Policy

Japan's ambitious economic agenda still has yet to gain traction. A higher consumption tax could prove counterproductive.

August 8, 2013 at 8:40 PM UTC

By Matthew C Klein

Matthew C. Klein writes for Bloomberg View about the economy and financial markets. He previously wrote for the Economist magazine and its economics blog, Free Exchange. Before that, Klein was a research associate at the Council on Foreign Relations, where he spent more than two years studying the history of the Federal Reserve and the intellectual history of monetary economics for an upcoming book by Sebastian Mallaby. He also worked at Bridgewater Associates, where he studied the economies of Central and Eastern Europe and advised institutional investors on asset-liability management. Klein has a bachelor's degree in history from Yale University. Originally from Chicago, he lives in New York.

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Haruhiko Kuroda, the Bank of Japan's boss, today warned the government that it needed to raise the national consumption tax to 8 percent from its current 5 percent.

Just why he favors a tax increase, to go into effect in April 2014, is a bit puzzling in light of the health of Japan's economy. It's almost as if he doesn't recognize that, so far, monetary and fiscal activism hasn't done much to boost growth. A quick check of recent data suggests that this isn't the time to talk about taking money out of consumers' pockets.