Laws make discounts tricky

Retailers may not reflect tax hike in prices

JIJI, Kyodo

Two major retailers might decide to leave product prices unchanged after the consumption tax is raised to 8 percent next April.

“It is our duty to offer an item, say currently priced at ¥98, at the same price even after the tax rate rises to 8 percent,” Shohei Murai, president of supermarket chain Daiei Inc., said at a news conference Thursday in Tokyo.

“We will do all we can not to raise prices,” Murai said.

Given Prime Minister Shinzo Abe’s decision this week to raise the 5 percent consumption tax rate to 8 percent next April, retailers are being closely watched because they have such an enormous impact on consumer behavior.

Separately, Uny Group Holdings Co., which owns the units running convenience store chains Circle K and Sunkus, said the retail group wants to absorb the rise in tax costs “as much as possible” on its private-brand products.

Setting tax factors aside, however, the Uny group may have no choice but to raise prices on other products if the manufacturers raise them because of climbing raw materials costs, President Motohiko Nakamura said.

However, explicit price cuts to offset the 3-point tax hike have been banned by law, and major retailers are trying to word their price-saving efforts carefully.

In June, the Diet enacted a bill banning the advertising of discount sales that are overtly designed to offset the impact of a tax hike. Under the temporary law, which expires at the end of March 2017, retailers must raise prices to reflect the hike in the consumption tax.

The rationale of the law: Discount sales directly linked to tax hikes could leave small and midsize wholesalers under pressure from large-scale retailers not to raise prices after the levy is raised.

Lagarde lauds levy hike


International Monetary Fund chief Christine Lagarde has praised Japan’s planned consumption tax hike as an initial step toward reducing the country’s crushing debt burden, while calling for further efforts.

Lagarde said Thursday that Japan needed “a credible plan” to reduce its national debt, which is nearing 250 percent of gross domestic product, the heaviest debt burden among advanced economies.

“The initial consumption tax increase is a welcome first step,” Lagarde said in a speech at George Washington University. “Entitlement reform is the next one. Without these policy fundamentals, any gains made so far could easily melt away.”

Prime Minister Shinzo Abe announced Tuesday that he intends to raise the consumption tax to 8 percent from 5 percent in April, and hopes to soften the impact with a ¥5 trillion stimulus package.