Taxes Boost Inflation in Japan

June 27, 2014 Taxation in Japan

Consumer spending in JapanTOKYO – The recent tax hikes in Japan have seriously hampered consumer demand in May, as shoppers spent more in the month prior to the increases.

Inflation levels in Japan over the month of May rose by the highest amount since 1982 due to the country’s recently implemented sales tax hike, according to new information released on June 27th by the Ministry of Internal Affairs.

Consumer prices in the country rose by 3.4 percent in May, compared to the same month in the previous year, following a year-on-year rise of 3.2 percent over the month of April.

The sudden increase in prices was accompanied by a reduction in consumer spending of 4.6 percent in April, and a further 8 percent over the course of May.

The sales tax in Japan was raised from 5 percent to 8 percent in June this year, and is slated to rise to 10 percent next year.

Some economists explained that the drop in consumer spending was due to the fact that many shoppers opted to bring their planned purchases forward, in order to avoid the tax increase, and the current drop is simply an issue of timing, as shoppers will return to their normal spending patterns within the coming months.

The current monthly inflation levels are the highest on record since 1982.

Photo by: Holly Golabek