John Maynard Keynes (1883-1946), the British economist who advocated government intervention to regulate financial health, has lately been cited in the Japanese press in reference to the current administration's plan to raise the consumption tax (CT). When he held the post of finance minister for five months right before becoming prime minister in June of last year, Naoto Kan famously remarked that he didn't understand Keynes, who believed in the multiplying effect of stimulus: If you inject money into the economy, either through subsidies or tax cuts, people will spend that money and the economy will expand in various ways.

Before the March 11 earthquake and tsunami, the CT argument was centered on public welfare — more exactly, how to take care of Japan's rapidly aging society. Now the argument is doubly urgent, since funds are desperately needed for reconstruction. Kan has already proposed issuing new bonds and raising the consumption tax from 5 percent to 8 percent for three years. The bond proposal has received mixed reactions since it would increase Japanese debt, which is already the highest in the world, thus further undermining international confidence in Japan. But the main discussion in the media is about taxes. Would an increase do more harm than good?

On a recent edition of the TV Asahi talk show "Morning Bird," several economists discussed the wisdom of a hypothetical ¥10 trillion tax cut. Based on the Keynesian model, such a reduction could be expected to grow the economy by ¥1.2 trillion, which would be great. However, a tax cut means the government takes in less money and the debt would also grow. Moreover, the Japanese public has been skittish about spending, especially when the general psychological mood tends toward uncertainty about the future, a situation exacerbated by the disaster. There's no guarantee that people wouldn't just take the tax cut and stash it away.