The Political Economy of the Consumption Tax

Naotatsu Hosaka

Japanese Economy, 1990, vol. 18, issue 4, 19-47

Abstract: 1. The problem and points of view: On April 1, 1989, a consumption tax went into effect in Japan, demonstrating the various effects at all levels of the economy that might be expected of a tax described by its proponents as "a consumption tax with a tax burden spread widely and lightly." This multistage, Japanese-style value-added tax, which was based on the assumption that it would be easy to shift, is plainly showing its defects in the short-term price effects that have been so conspicuous at each level of tax shifting—the opportunistic price increases and the excessive shifting or insufficient shifting, as the case may be, depending on the degree of market imperfections and the relative competitiveness of the various participants.

Date: 1990
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DOI: 10.2753/JES1097-203X180419

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