I once issued a definitive proclamation regarding Peter Tasker, a founding partner of Arcus Investments.
It turns out I was wrong.
In his latest opinion piece for the Financial Times, Mr. Tasker has nothing interesting to say (Link).
It seems that sometimes even the best just phone it in.
For a better look at the short-term and mid-term consequences of the consumption tax legislation, read this Bloomberg report (E). Ignore the title (titles on wire service reports are too often misleading) and concentrate on what the analysts are saying about 2013, the election year. The looming threat of a tax rise in April 2014 will likely increase consumption over 2013, stimulating overall economic growth, as companies and individuals pick up big ticket items before the 3% jump in prices. The likelihood that consumers will shell out for goods and services at current prices, staring as they are at whalloping, regressive tax rise in 2014, will likely stabilize prices, nullifying, even if only temporarily, the long-term deflationary trend. Whether the halt in deflation triggers a spike in equities investments, given the sudden crash in real returns on bonds, is a question best put to Naomi Fink, a.k.a the Smartest Person In Tokyo, of Jefferies.
I am not as sanguine as Adam Richards (E), I certainly cannot be convinced that in a world where every country's bond yields are low -- some even lower than Japan's -- and a rock hard yen that is killing exporters, that a tax rise taking a first stab at stabilizing the nation's fiscal health is a really bad idea.
I on the other hand see no real actual evidence that a consumption tax increase will make all that much difference either which way unless the feared double dip from an implosion in Europe comes to pass. I notice in Tasker's article he make the common claim that Japan raised the consumption tax in 1997 and the "Japanese economy has not recovered since." I am extremely skeptical that a 2% increase in the consumption tax was the true cause of apparently 14 years of recession. Surely the East Asian Financial crisis and some of Japan's zombie debt (home grown financial crisis) coming home to roost was a far more likely cause of deflation? Anyway, Japan grew through the middle of the 2000s only to be hamstrung by a financial crisis again, but prices were stabilizing just before 2007. Japan's tax revenue even made it back over the 1996 figure Tasker cites just before the GFC kicked in. If deflation continues other factors will be responsible I feel - things that are done, or more so, not done.
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