Taxing consumers is not popular with voters. So much so that Japan, for example, has avoided the issue for almost two decades. But last week a consumption tax rise was passed by the lower house. In response, Ichiro Ozawa, former leader of the Democratic Party of Japan, resigned from the ruling bloc on Monday to form his own political group. Why so emotive?

Well, for a start the increase is not small. Prime minister Yoshihiko Noda wants to double consumption tax in two stages from 5 per cent today to 8 per cent in April 2014 and to 10 per cent in October the following year. Japan has been here before. In April 1997 the rate was lifted by just 2 percentage points to 5 per cent against an encouraging backdrop. The Topix had gained 20 per cent since June 1995, economic output was growing by 2 to 3 per cent and consumption was solid.

On top of the tax rise came Japan’s own financial crisis and the Asian currency meltdown. The result? Consumption promptly dropped about 1 per cent and barely recovered thereafter. Output shrank and stocks plunged. The retail index fell by a quarter before the internet boom arrived.