Abe’s rhetoric has not been German. Especially not recently.
But his policies over the last two years have been. At least until recently.
The International Monetary Fund’s fiscal department estimates that Japan did a consolidation of over 2 percentage points in 2014 and another half point or so of fiscal consolidation in 2015, net of any gains from lower interest payments.*
Japan has a history of passing lots of highly hyped stimulus packages. But in many cases those stimulus packages just offset the roll-off of past stimulus packages, without generating much net fiscal impulse to the economy.
Postponing the consumption tax hike consequently makes a great deal of sense. Japan’s economy—the domestic side at least—never recovered from the last hike.
Private consumption demand fell around 1.5 percentage points of GDP immediately after the consumption tax hike, and hasn’t recovered. Annualizing quarter-over-quarter changes in the level of consumption produces noisy headlines every quarter—but the basic trend is clear by now. Even in Japan with its demographics there should be an upward slope to consumption over time in a normally performing economy.
Japan’s 2014 consumption tax hike consequently should rank a bit higher in the various cases used to examine the impact of fiscal austerity.
There was a clear swing toward austerity, and thus a clear contrast. Fiscal policy was modestly expansionary by any measure in 2013.