Japan’s retail sales hit lowest in 4 years, tax hike takes toll

Japan’s retail sales posted its hardest fall since 2015 as sales tax hike forced consumers to cut spending, domestic demand went in limbo.

After the government of Japan increased that nationwide sales tax to 10% from a previous 8% rate on Oct. 1, retail sales dropped 7.1% in the same month from the previous year.

Japan raised the sales tax to fix the industrial sector’s heaviest public debt woe, which already hit more than twice the size of Japan’s GDP.

Prior to the implementation of the tax hike, analysts had warned the government that the tax increase could leave the economy without a growth driver amid the slumping export numbers and production outputs.

The retail sales dropped due to weaker demands in cars, household appliances, and trading, according to the data released by the trade ministry on Thursday.

“Retail sales fell more sharply in October than after previous sales tax hikes,” Tom Learmouth, Japan economist at Capital Economics said.

“The fall in sales was slightly larger than the 13.7% m/m plunge which followed both the 1997 and 2014 sales tax hike,” he noted.