Business / Economy

Last-minute demand before Japan's tax hike failing to meet expectations

JIJI

Consumer demand for products ahead of the planned consumption tax hike from 8 percent to 10 percent in October has been patchy compared with the previous increase carried out in April 2014.

At the time of the previous increase, from 5 percent to the current level, consumers began flocking to car dealers to buy new vehicles more than six months before the move. This time, sales have been slow ahead of the coming tax increase.

The sluggish new car sales reflect measures aimed at curbing a surge in demand before the tax increase and a possible subsequent plunge after the hike, including the government’s plan to reduce an automobile-related tax by up to ¥4,500.

“People are becoming cautious about purchasing new vehicles as they try to confirm the impact of such measures,” an auto industry official said.

From September 2013 to March 2014, just before the previous consumption tax hike, monthly sales of new vehicles posted year-on-year growth of over 10 percent, according to an industry group. No auto-related tax breaks were offered at the time and the 3 percentage-point tax hike took place in early spring, when demand generally increases for many goods.

But no month has seen double-digit growth in new auto sales recently. Sales in January to June this year were up only 0.8 percent from a year before.

Meanwhile, the home appliances industry has enjoyed a surge in demand ahead of the October tax hike, amid a lack of measures to prevent wild sales fluctuation before and after the increase, with some products seeing sales growth of over 10 percent.

“In particular, sales have been robust for television sets and washing machines,” an official of electronics giant Panasonic Corp. said.

“Washing machines and stick vacuums are selling well,” an Hitachi Ltd. official said.

The sales boom is also due to a number of consumers using the government’s eco-point incentive program introduced in 2009 to replace older products. The measure was introduced to deal with slumping demand in the aftermath of the global financial crisis triggered by the collapse of U.S. investment bank Lehman Brothers in 2008.

In anticipation of a last-minute demand surge, some retailers are introducing autumn and winter items earlier this year.

Department store operator Sogo & Seibu Co. has expanded its lineup of clothing for adults.

Retail giant Aeon Co. started selling autumn and winter furniture and bedding products right after the Bon summer holiday period in mid-August, about a month earlier than usual.

Brewers are preparing for an increase in demand for their mainstay products as beer will be exempted from the scope of items for which the consumption tax rate is set to be kept at 8 percent.

In September, Kirin Brewery Co. will boost output of its popular Ichiban Shibori and Nodogoshi Nama beer products by some 20 percent from a year before.

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