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Japan Oct tax hike impact milder than 2014 increase

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TOKYO: More than two-thirds of Japanese companies are feeling less pain from a tax increase last month than from the previous increase five years ago, which precipitated a recession, a Reuters poll found.


The results of the Reuters Corporate Survey support the view of the government and Bank of Japan that the economy looks likely to avoid a swoon in private consumption, thanks to steps taken to offset how the tax increase would affect the public. Still, the overwhelming majority of Japanese companies remain cautious about boosting spending, with many planning to keep wages and hiring flat or even reduce them. The survey offers the first corporate gauge of the impact of increasing the national sales tax to 10 per cent from 8 per cent, a step Prime Minister Shinzo Abe said was critical to curbing Japan’s enormous public debt. He delayed it twice for fear it would squeeze consumer spending.


More than 70 per cent of companies in the Reuters poll said both the rush to buy ahead of the October 1 increase and the subsequent pullback have been milder than when sales tax increased from 5 per cent in April 2014. That tax hike dealt a blow to private consumption, which makes up about 60 per cent of the economy. When the economy stumbled after the 2014 increase, BoJ Governor Haruhiko Kuroda said he had underestimated the shopping spree and pullback, and subsequent declines in real income. — Reuters


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