business

Japan's April retail sales rebound, easing pressure on BOJ

7 Comments
By Leika Kihara

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Natural for the year to year figure to rise, given that last April was when the tax rose, and sales plummetted.

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@jefflee, that's just what I was thinking. Up 0.4% from the previous month's 1.8% drop means diddley squat, especially considering all the new freshmen buying their suits and appliances. A 5% increase from last year's precipitous drop still means that the majority of consumers are continuing to be frugal, though not really by choice. Unlike the spendthrift politicians, Mr and Mrs Taro Suzuki can not conjure more zeros into their bank accounts at will.

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People have gotten used to the new tax (much like Canadians did when their government imposed a VAT in 1989). However, retail sales would have been much more robust if the government had left the consumption tax at 5%, and focused on fixing the economy.

PM Abe needs to work on increasing trade, liberalizing the economy, and lowering taxes on income and profits. Consumers won't change their discretionary spending habits much if their incomes are constantly taxed. The same goes for businesses. Though Japan's corporate tax rate is relatively low, taxes on businesses are still very high.

For a government that wants to see higher inflation, it's doing its level best to ensure deflation continues. All the data shows that raising the consumption tax was reckless, and irresponsible given the state of the economy at the time.

The BOJ's efforts won't make much of a difference to the finances of most working people. The economy is still weak, so the pressure remains on consumers to eke out a living on incomes with less, and less buying power.

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JB, I wouldn't say the people have gotten used to the tax, but rather have had to reluctantly succumb.

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eases pressure on the Bank of Japan to expand its massive stimulus program in the near term, analysts say.

Mercifully!

there is uncertainty on whether consumers will shake off the “deflationary mindset” that beset Japan for two decades.

This "deflationary mindset" talk is nonsense really.

Prices in Japan are above their 1990 levels, and have basically tracked flat for the past two decades. That's price stability.

The only way this becomes "deflation" is if one thinks relative to other economies, where inflation was running above flat, at around 2%. If inflation is "price stability", then yes, Japan has "deflation".

Why the geniuses of the LDP think Japan could do with erosion of purchasing power is presumably because of the high public debt load the LDPs failed policies have burdened upon the country.

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Household spending holds the key to the success of the central bank’s massive stimulus programme,

Well then, you don't have to be a genius to figure out it isn't working:

On a seasonally-adjusted month-on-month basis, retail sales rose just 0.4% in April after sliding 1.8% in March, underscoring the fragile nature of the recovery.

They pumped an additional $29 Billion into the economy in the first quarter, and this is the result?

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They pumped an additional $29 Billion into the economy in the first quarter, and this is the result?

Well, jerseyboy, the additional 29bn$, the rest of the cash, didn't go into the economy at large. The money went to select institutions, and businesses. Certainly, if consumers had had access to those funds, the results would like have been different, perhaps even better.

Instead of QE, the government should've used tax cuts, and incentives for consumers, and businesses. More robust investment, and consumer spending are more conducive to economic growth, and inflation, than tax increases.

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