Japan's households tighten purse strings as sales tax, typhoon hit
Japan Today -- Dec 07
Japanese households cut their spending for the first time in almost a year in October as a sales tax hike prompted consumers to rein in expenses and natural disasters disrupted business.

Household spending dropped 5.1% in October from a year earlier, government data showed on Friday, down for the first time in 11 months and the biggest fall since March 2016 when spending fell 5.3%. It was also weaker than the median forecast for a 3.0% decline.

That marked a sharp reversal from the 9.5% jump in September, the fastest growth on record as consumers rushed to buy goods before the Oct. 1 sales tax hike from 8% to 10%.

“Not only is the sales tax hike hurting consumer spending but impacts from the typhoon also accelerated the decline in the spending,” said Taro Saito, executive research fellow at NLI Research Institute.

“We expect the economy overall and consumer spending will contract in the current quarter and then moderately pick up January-March but such recovery won’t be strong enough.”

Household spending fell 4.6% in April 2014 when Japan last raised the sales tax to 8% from 5%. It took more than a year for the sector to return to growth.

Compared with the previous month, household spending fell 11.5% in October, the fastest drop since April 2014, a faster decline than the median 9.8% forecast.

Analysts said a powerful typhoon in October, which lashed wide swathes of Japan with heavy rain, also played a factor in the downbeat data. Some shops and restaurants closed during the storm and consumers stayed home.

News source: Japan Today
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