Japan's Sales Tax Hike Seen Critical for Fixing Tattered Finances

Japan’s household spending is expected to have fallen at the fastest pace in about 1-1/2-years in October after a hike in the sales tax, a Reuters poll showed on Friday.

Household spending likely fell 3.0% in October from a year earlier, the poll of 15 economists found, the fastest pace of decline since May 2018 when it fell 3.8%.

Japan raised the sales tax to 10% from 8% on Oct. 1, a move that is seen as critical for fixing the country’s tattered finances.

From the previous month, household spending was seen falling 9.8% in October, the fastest pace of drop since April 2014 when the nation previously raised the sales tax.

In September, household spending year-on-year rose at the fastest pace on record as consumers rushed to buy goods before the tax increase.

“We expect spending on such as durable goods and luxury products fell after it was boosted ahead of the tax hike,” said Koya Miyamae, senior economist at SMBC Nikko Securities.

“Also a huge typhoon during the three-day holiday last month likely damaged service spending.”

The government will announce household spending data at 8:30 a.m. Japan time on Dec. 6 (2330 GMT, Dec.5).

Read here