The Next Tax Hike?

Prime Minister seems to indicates he plans to go ahead with the next consumer tax hike, from 8% to 10%. Consumer tax hikes are/were never popular in any country, but especially in Japan, as consumer spending is always the major area of concern for the Japanese government, due to the rising ageing society. In  2014, when the tax hike was from 5% to 8%, consumer spending plunged as expected in Q2. In Q1 of that year consumer spending increased, of course, as consumers spent ahead of the future tax hike, which is consistent with supply/demand in economics. Then in Q3 consumer spending seemed to move back to normal, as Japanese consumers, as everywhere, got used to the higher prices. It remains to be seen if the same spending pattern or behavior will again result in the quarter before a large increase, then in the tax hike quarter a decrease, and then the next quarter back to normal. The government has been laying out plans for exemptions for some products and services mainly in the retail or food service industries that would be exempt from the tax hike. But the details are not clear yet.


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