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Last-minute demand before Japan tax hike remains uneven

  • August 31, 2019
  • , Jiji Press , 10:00 a.m.
  • English Press

Tokyo, Aug. 31 (Jiji Press)–Growth in demand for products ahead of the planned consumption tax hike from 8 pct to 10 pct in Japan in October has been patchy compared with the time when the previous increase in the rate of the levy, from 5 pct to the current level, was carried out in April 2014.

At the time of the previous increase, consumers began flocking to car dealers for new vehicles more than six months before the move. This time, sales have been slow ahead of the coming tax hike.

 

By contrast, home appliances have been in high demand.

 

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 yen from October.

 

“People are becoming cautious about purchasing new vehicles” as they try to confirm the impacts 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 pct, according to an industry group.

 

The robust results came as no auto-related tax breaks were offered at the time and the 3-percentage-point tax hike was conducted early spring, when demand generally increases for many goods in the country.

 

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

 

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

 

“In particular, sales have been robust for television sets and washing machines,” an official of electronics giant Panasonic Corp. <6752> said.

 

“Washing machines and stick vacuums are selling well,” an official of industry peer Hitachi Ltd. <6501> said.

 

The sales boom in the industry came also because a number of consumers are replacing products they bought using the government’s eco-point incentive program introduced in 2009 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 launching autumn and winter items earlier than usual.

 

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

 

Retail giant Aeon Co. <8267> started sales of bedding goods and furniture for autumn and winter 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 pct.

 

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

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