Shoppers feel pinch as Japan hikes sales tax
Print Edition
PRICES rose across Japan yesterday as a controversial sales tax rise came into effect, with everything from beer to washing machines costing more, sparking fears a drop in consumer spending will derail a nascent economic recovery.
Tokyo agreed to hike the levy to 8 percent from 5 percent as it looks to control a public debt mountain but corporate Japan’s concerns were highlighted by a closely watched survey of business sentiment showing bosses are cautious about the future.
In a country beset by years of deflation, critics warn that already thrifty shoppers would snap their wallets shut. The last time Japan introduced a higher sales levy, in 1997, it was followed by years of deflation and tepid growth that defined the country’s protracted slump.
Among those waking to the higher prices was 18-year-old university student Hibiki Ishida, who was not impressed when he bought his favorite chewing gum during Tokyo’s morning commuter rush.
“I get this gum every morning and I know the price is 120 yen (US$1.15),” he said. “But I handed 120 yen to the shop clerk today and she told me it was now 123 yen — that unnerved me.”
The rise has presented a huge challenge for Prime Minister Shinzo Abe since he swept to power in late 2012 on a ticket to drag the world’s No. 3 economy out of a cycle of falling prices and tepid growth.
Yesterday, defending the rise — which could be followed by another, to 10 percent — Abe pointed to spiraling health care and social welfare costs which are straining the public purse in a rapidly aging society. The tax rise “is meant to offset increases in social security costs over the years and to maintain the country’s trust,” he said.
Also, yesterday, a closely watched Bank of Japan survey showed that business confidence soared to a more than six-year high in the January-March quarter as the economy shows signs of picking up. However, company bosses appear cautious about the future as the survey of more than 10,000 firms pointed to lukewarm investment and slumping sentiment for the April-June quarter.
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