The adrenaline rush from spending ahead of the tax hike has apparently worn off, and sales have petered out in the first month after April 1.
Japanese household spending soared in March as consumers rushed to beat the planned consumption tax hike, Japan’s first in 17 years. However, the momentum was short-lived, and a drop-off is forecast for the months to come.
The downtrend was felt across the country, as department stores, electronics chains and auto dealers reported plummeting sales in April.
Five major department store operators reported a decline of between 7.9 and 15.3 percent from the previous year. Sales dropped by about 20 percent at all five companies during the first week of April, but sales have recovered every week recently, said an official at Daimaru Matsukaya Department Stores.
Electronics retailer Bic Camera Inc said sales for April were down about 10 percent after a buying spree before the tax hike, which pushed up overall sales to more than 50 percent. K’s Holdings Corp recorded a drop of 20 percent from year-earlier levels.
Meanwhile, vehicle sales last month in Asia’s second-largest auto market fell their lowest mark since December 2012. Total sales fell 5.5 percent to 345,266, according to the Japan Automobile Dealers Association and Japan Mini Vehicle Association.
The tax increase poses a lesser threat to food sellers such as supermarkets and convenience stores in Japan. General merchandiser Aeon Retail said the decline it reported in April was smaller than the one that followed the 1997 sales tax hike.
Supermarket chain Inageya said sales of fresh foods and prepared dishes have been higher than year-earlier figures since the second week of April. Convenience store giant 7-Eleven said its Japan sales increased last month.
Household spending rose 7.2 percent in March from a year earlier, data showed Friday.
“Household spending was stronger than expected in March, pointing to considerably high growth in private consumption in the first quarter on pent-up demand ahead of the sales tax hike,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
A Nikkei poll showed that more than 80 percent of the nation’s key retailers expect sales to recover around June.
“The pullback in demand after the tax hike may be within expectations so far … But we need to wait to see how consumption fares in May and June before making any judgement,” Minami said.
By Maesie Bertumen
Image: “Japanese Shopping Alley” by DILLEmma Photography/Flickr