Abe Sales Tax Seen to be Backfiring

What started as a plan to reduce Japan’s debt is turning into a reason to issue more bonds.

Prime Minister Shinzo Abe’s administration implemented a higher sales tax in April to boost revenue as government liabilities ballooned to 1 quadrillion yen ($8.5 trillion), more than double the nation’s yearly economic output. Consumption plunged and the economy fell into a recession, prompting companies including Mirae Asset Global Investments Co. and High Frequency Economics to predict even more sovereign debt sales to revive growth.

“The government’s policies have failed,” Will Tseng, a money manager in Taipei at Mirae Asset, which manages about $62 billion, said in an e-mail Nov. 20. “They’re still issuing more debt and printing more money to try to help the economy. They’re in a really bad cycle.” He said he’s staying away from Japanese bonds.


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