Posterity is watching carefully as Shinzo Abe goes ahead with a sales-tax increase aimed at getting a handle on Japan's huge debt burden, the world's largest. Unfortunately history may judge him no better than Ryutaro Hashimoto, the last Japanese prime minister to kill an economic recovery with ill-timed fiscal tightening.
That's not the conventional wisdom of the moment. Markets are euphoric over surging confidence among large Japanese manufacturers. September's jump in the quarterly "tankan" index — to the highest levels since before the Lehman Brothers Holdings Inc. collapse in 2008 — gave Abe just the tail wind he needed to raise the consumption tax to 8 percent from 5 percent starting in April 2014, with a further 2 percent increase in the cards for 2015.
Yet Abe is ignoring two things that could end his revival program, dubbed Abenomics: the precedent set by Hashimoto, Japan's 53rd prime minister, and the specter of inflation.