New government data shows a surge in tax revenue in fiscal 2017, to ¥58.7 trillion, the result of strong economic growth. Yet with tax rises on the horizon, increased revenues could be under threat as history has shown that tax hauls are especially vulnerable to economic conditions, a fact that makes some experts wary.

The Finance Ministry on Wednesday announced that revenue in that fiscal year was at its highest level since fiscal 1991 and the third highest level on record, thanks to economic growth and record corporate profits.

“Due to strong economic growth in the world economy and high stock prices, under current economic conditions, revenue could finally reach ¥60 trillion once again,” said Akihiko Noda, a senior researcher at Mizuho Research Ltd.

But the latest positive government data also shines a light on a long-standing predicament — of a government unable to capture once again the same level of tax revenues seen under the country’s economic boom in the late 1980s and early 1990s. This fiscal challenge comes despite repeated attempts, and subsequent failures, to increase government income by raising taxes, which some experts say can imperil economic growth.

Tax revenues have resisted upward pressure over the past few decades after peaking at ¥60.1 trillion in 1990, according to data from the Finance Ministry.

Over the same time period, from 1990 to 2017, U.S. government tax revenue more than doubled, growing to $3.316 trillion from $1.351 trillion in 1990, according to the Urban-Brookings Tax Policy Center, a research center of Washington-based think tank the Brookings Institution.

Some economists look at the upcoming 2019 consumption tax increase as a potential step toward repeating mistakes of the past.

“With demand peaking out after the (2020 Tokyo) Olympics, and because of the possibility that the U.S. economy could slow down, government revenue could once again weaken in the second half of 2019,” said Toshihiro Nagahama, an economist at Dai-ichi Life Research Institute Inc.

But other observers believe this time really could be different, as the economy is driving forward and policymakers appear to be aware of the dangers tax increases can pose to consumption.

“The government has learned some of the lessons of the past when it comes to tax increases,” said Masahiro Kawai, Bank of ﻿﻿ Japan adviser and project professor of the Graduate School of Public Policy at the University of Tokyo.

For Kawai, the lesson is not “do not raise taxes.” Instead, he takes a more nuanced position that government should give careful consideration to how and when tax hikes are implemented — referring to the 2014 consumption tax increase as an example of how tax increase can stunt economic growth and tax revenues.

A similar scenario was played out in 1997 under then Prime Minister Ryutaro Hashimoto, when consumption taxes were raised only to see decreased overall tax revenues as growth slowed.

Since the financial crisis of 2008, European economies have also seen tax revenues fall flat despite repeated attempts to raise them and introduce new sources, due at least in part to flatlining economic growth. These cases also underline how economic malaise can undercut government efforts to raise more revenue.

Greek tax revenues plummeted from €81 billion in 2008 to €65 billion in 2016, according to Eurostat. This was despite the fact that Greek authorities repeatedly raised taxes throughout the period.

“If nominal GDP declines then nominal tax revenue tends to follow,” said Kawai, who pointed out the importance of economic growth as a driver of long-term economic sustainability.

While the exact relationship between tax hikes and government revenues remains up for debate, Japan’s government is faced with the daunting task of filling a massive hole in its finances by any means necessary — whether that is by achieving faster economic growth or imposing more tax hikes.

According to a spending and expenditure report for fiscal 2017, published by the Ministry of Finance, government spending in the year reached ¥97 trillion, ¥32 trillion of which went to pay for social security while ¥23 trillion was used simply to pay back interest on the growing burden of existing debt.