The consumption tax reform is considered as one of the risky policies for the ruling party in Japan. But the Murayama cabinet (1994-1995) and the Noda cabinet (2011-2012) decided to increase the rate of consumption tax. How can we explain the decision making process? Using the behavioral economic theory “(Cumulative) Prospect Theory” that describes how people make decisions under conditions of uncertainty, this article shows that, as the support for the Murayama cabinet and the Noda cabinet were getting worse and worse, the ruling parties turned to be the risk-loving player who is willing to take more risks in order to earn higher returns and then decided to commit the tax reform.
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