Back in 2012, some people were worried that rising price inflation in the UK meant that the Bank of England should tighten. But Krugman explained why that was wrong:
But, say the small-[output]-gap people, if Britain is deeply depressed relative to potential, we should be seeing deflation, whereas there’s actually inflation. Is this a decisive argument?
Well, the great bulk of UK inflation these past few years reflects one-off factors: VAT increases, commodity prices, and import prices. Domestically generated inflation is low, and headline inflation is declining too. [Bold added.]
Everyone got that? Krugman was saying that Britain’s increase in the Value Added Tax (VAT) contributed to a spike on headline price inflation, so it could safely be ignored and there was no need to tighten.
Now regarding Japan, Krugman gave his advice right to the Prime Minister:
With a handful of aides and secretaries present at the reception room on the fifth floor of Abe’s residence in the Nagatacho district southwest of the Imperial Palace, Krugman began by praising Abenomics, describing how much he respected the program to revive Japan after 15 years of deflation, Honda said.
The only problem was the sales tax, Krugman said, according to Honda. Honda, Hamada and another aide, Eiichi Hasegawa, kept quiet. Honda says that by the end of the meeting, he was convinced Abe would decide on postponement.
Hamada, who had advised Abe on his pick for Bank of Japan governor, said that “Abe listened to Krugman’s view very carefully.” Hamada said in an interview Nov. 18 that “he probably helped the prime minister make up his mind.”
Abe himself highlighted his discussion with Krugman when speaking on the national public television broadcaster NHK three days ago.
“He said we should be cautious this time in raising the sales tax and if we weren’t it would break the back of the economy,” Abe said. “He said if that happened, we wouldn’t escape deflation, it would be uncertain whether we could revive the economy and repair the nation’s finances. I think that’s the case.” [Bold added.]
So Krugman was urging for the continuation of stimulative fiscal policies, because increasing the sales tax would lead to (price) deflation.
It looks like a general consumption tax either raises consumer prices or reduces them, based on what the answer needs to be to justify the extension of Krugman’s policies.