Japan unexpectedly announced this week that its economy is hurting, with negative growth reported for both the second and third quarters of 2014. Why? Stephen Moore, The Heritage Foundation’s resident economist, gives us the answer — and it probably won’t surprise you.
Japan raised taxes, in particular its sales tax.
It was supposed to be a way to help lower the national debt after massive government spending on infrastructure. Liberals also persuaded the Japanese Central Bank to flood the country with printed money in an effort to stimulate the economy. The result was a negative economic recovery as well as a devalued yen that makes it harder for the Japanese to buy imported goods – and all in just over six months.
It’s all a tragic story of economic playmaking that has gone all wrong. But don’t tell that to Paul Krugman of the New York Times, who predicted Japan “may end up showing the rest of us the way out” of stagnation.
Should the United States follow the Japanese example?