Effect of Sales Tax Increase in Japan Starting at Economy

TOKYO – Industrial production and consumption of Japanese households shrank more than expected and drove inflation to its highest level for 23 years due to the increase in sales tax in April.

Government data showed production slumped 2.5 % in April 2014 from the previous month , while household consumption also fell 4.6 % in April this year year-on – year ( yoy ) .
The increase in the sales tax from 5 % to 8 % is part of the Japanese Prime Minister Shinzo Abe in stabilizing the Japanese economy , while reducing the debt burden of the State of the Rising Sun .
” Not only that , these data refute the government’s assertion that the current economic conditions it is more resilient than the sales tax increase in 1989 and 1997 , due to the fact it sebaliknya.Ekonomi said Japan will bounce back III/2014 quarter , but the pace of recovery is still moderate , said Yuichi Kodama , economist at Meiji Yasuda Chairman Life Insurance Co. . in Tokyo , Friday ( 05/30/2014 ) .

Some economists predict the Japanese economy shrank 3.4 % in the quarter II/2014 , after having soared 5.9 % in the quarter also hoisted I/2014.Kenaikan tax rise in core inflation in Japan up 3.2 % in April yoy , the fastest rise since February 1991 .According to him , the Japanese economy continued to weaken an opportunity to delay the sales tax increase volume 2 in October 2015 . Additionally , an indication of the stimulus disbursement will be reinforced to reduce the slowdown in Japan’s economic recovery .

Bank of Japan ( BOJ ) said the tax increase in April will contribute 1.7 % of annual inflation in April and 2 % to inflation in May of this year .

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