Monetary easing and some attempt at structural reform

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Abenomics seems to me like a straightforward and modern plan of economic revelation through monetary easing and some attempt at structural reform.

While it's still early, it looks like many of the predicted effects of this approach have begun to materialize: unemployment is lower, earnings are higher, and currency has deflated resulting in a rise in exports and improvements to corporate earnings. Capital has, unfortunately, accumulated on corporate balance sheets rather than re-entered the economy, but even this is a known effect of easing.

One thing I don't understand (aka my question) is: why did the Japanese government seek to raise consumption tax (VAT) during this process?

It would seem that the whole point of easing is to stimulate productive money circulation, and implementing a consumption tax when consumers are likely to suffer in the initial stages from currency devaluation seems very counterproductive to the cause. If the government actually needed the funds then surely there were other approaches available (borrowing or deferred taxation) which would have had less negative impact on the overall easing programme?

Reference no: EM13769567

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