Δείτε εδώ την ειδική έκδοση

Sales tax rise hits Japan's retail spending

Prime minister Shinzo Abe's efforts to reboot Japan's economy suffered a setback on Tuesday, after gloomy economic data showed a drop in consumption and a rise in the unemployment rate.

The jobless rate climbed to 3.7 per cent in June, up from 3.5 per cent in May, confounding predictions that it would remain stable. Japanese retail trade figures for June also fell short of expectations, rising 0.4 per cent from the previous month, compared with a 0.8 per cent rise predicted by a Bloomberg pool of economists. In May, retail sales had increased by 4.6 per cent.

The figures raised fresh doubts over the success of the government's strategy to revive growth and cast a shadow over Tokyo's decision to increase Japan's consumption tax in April from 5 per cent to 8 per cent.

Analysts fear the sales tax increase could prove more damaging than the last VAT rise in 1997, which contributed to a steep slowdown in the economy. They attributed the drop in consumption to the slow rise in wages, which have failed to keep up with a rising cost of living. Japan's inflation hit 1.5 per cent in April, a six-year high, on the back of an unprecedented monetary stimulus by the Bank of Japan aimed at lifting the country out of nearly two decades of deflation.

"It appears that correction of real household consumption following the April VAT hike has been much deeper than the 1997 episode when the VAT was hiked to 5% from 3%. Sluggish wage growth has to be responsible in our view," Hiromichi Shirakawa and Takashi Shiono, analysts at Credit Suisse wrote in a note.

<

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

>Izumi Devalier, Hong Kong-based economist at HSBC, added that the Japanese government would come under increased pressure to introduce more stimulus measures if a picture of muted consumption persists into the third quarter. Mr Abe would also face a growing debate over the wisdom of going ahead with plans to ramp up the sales tax again to 10 per cent in 2015.

"June consumption data showed that the slowdown in spending following the . . . April VAT increase is easing, but the pace of recovery remains weak," she said, adding that whether people chose to spend summer bonuses paid out by mid-July could be a fillip in the post-sales tax bounceback.

Analysts regarded the unemployment rate figure in a more positive light, however, arguing that it reflected an increase in the number of people joining the labour force rather than a surge in the unemployed.

"Today's labour market reports send an encouraging message that . . . increasing number of people [have] come back to the labour market," analysts at JPMorgan said in a note.

Tuesday's data cap a month of gloomy Japanese economic data. Last week, it was revealed that Japan's trade deficit widened to a record Y822bn in June.

© The Financial Times Limited 2014. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation

ΣΧΟΛΙΑ ΧΡΗΣΤΩΝ

blog comments powered by Disqus
v