Report

Post-Tax Hike Consumer Spending Tracking 1997 Path

posted by Richard Katz on July 01, 2014

Found in Japan, categorized in Growth Outlook and Business Cycle

Tags: Japan spending consumption tax hike

Report Cover

Headline

This does not mean recession, as in 1997, but it does mean that the level of uncertainty about future spending is higher than previously assumed.

Abstract

May drop in consumer spending nearly four times as high as consensus forecast

April-May post-tax hike spending tracks fairly closely the pattern in 1997

This does not mean recession, as in 1997, but it does mean that the level of uncertainty about future spending is higher than previously assumed

It also raises the possibility that the already lame pace of recovery may end up being even more slow than now expected

May wage figures continue to demonstrate that Japan failed  to produce the big “wage surprise’ that Shinzo Abe had promised, with “base wages” up a mere 0.2% from 2013 in nominal terms and down 3.6% in price-adjusted terms

Real disposable income has been falling even faster than total real income due to a series of hikes in taxes as well as social security and healthcare premiums

Only a drop in the savings rate has kept spending from falling

A series of tax hikes over the next few years, not just the consumption, will reduce company employee incomes by 4.4% per year

About Richard Katz

Richard Katz

Richard Katz is Editor of The Oriental Economist Report, a monthly newsletter on Japan, as well as the semi-weekly TOE Alert e-mail service on Japan, and is also a special correspondent at Weekly Toyo Keizai, a leading Japanese business weekly.

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