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Big retailers fear ad ban after tax hike

JIJI

Domestic superstore operators are concerned about a government bill banning retailers from advertising price discounts to minimize the impact of the April 2014 consumption tax increase on customers and, eventually, their earnings.

The government says it has drawn up the bill to allow companies to smoothly pass on the heavier tax to prices of their products and merchandise.

The special legislation is particularly intended to protect small and midsize wholesalers from pressure by large-scale retailers not to boost prices after the tax increase. Also, the government fears that massive sales campaigns by superstores would distress smaller retailers that cannot afford such big price discounts.

But regardless of their sizes, retailers will inevitably be adversely affected by the tax increase as consumers tighten their purse strings.

“Regulating even ideas for keeping customers amounts to overkill,” a superstore official complained.

“This should be (the ruling Liberal Democratic Party’s) measure to win” support from small and midsize retailers in this summer’s Upper House election, a distribution company official said.

Superstore chains are also concerned about the effects the envisaged legislation will have on their sales campaigns already in place to attract consumers, for whom low prices are the norm now.

“We need clear guidelines on what is acceptable and what isn’t, otherwise there will be trouble between member firms,” said a Japan Chain Stores Association official.

From November 1998, major superstores launched campaigns called Reduction Sales to win back shoppers as spending shrank in the wake of the previous sales tax hike, from 3 percent to the current 5 percent, in April 1997.

At the time, these firms actually saw sales grow by cutting prices to offset the tax increase.

But with the tax rate now set to rise to 8 percent in April 2014 and to 10 percent in October 2015, consumer spending is expected to fall much more substantially.

If the Diet passes the bill, superstores will effectively be deprived of the magic wand, industry sources worry.

“Politicians don’t side with consumers,” an official at a superstore chain said.

“The government should not interfere and let companies work out how to cope (with the situation) on their own,” a distribution firm official said.