Optimistic Assessment of Impact

One object can be seen different, dependent on from which side it is looked. Impact of higher rate of consumption tax after its introduction a month ago must be negative from the perspective of the anti-government. Groups supportive for the government emphasize positive aspect of the tax hike, or intensively underestimate the negative impacts. True circumstance over the ordinary people would be “Ok, life goes on.”

Tokyo Shimbun, strictly criticizes the policies of Abe administration, reported significant down on sales in department stores, home appliances centers and car dealers. Four major department store chains marked decline by 7.9% to 15.3% on April, compared with the same month last year. Buying watches, jewelries and goods of foreign luxury brand showed steep down. Sales of new car declined by 5.5%, family appliance stores marked 10 to 20% down, and new housing decreased, by 2.9%, for the first time in these 19 months.

Nikkei Shumbun, definitely supports economic policy initiated by Prime Minister, Shinzo Abe, highlighted that most entrepreneurs supposed impact of the tax hike would be limited. According to its report, sales decline of department stores was slowed down from the time right after new tax rate had been introduced early April. While luxury goods are still in slump, women’s clothes are regaining its sales power. It quoted responses of an appliance store and a car dealer, both of which were optimistic views for next few months and impact of tax hike was within their anticipation.

This optimism is a reflection of governmental policy. Bank of Japan upholds 2% hike of commodity price by April 2015. On the last day of April, Governor of BoJ, Haruhiko Kuroda, announced his estimate that 2% rise of commodity price will be achieved and it would mark 2.1% in FY 2016. In the circumstance that independent estimations were mostly around 1% rise, Kuroda’s announcement was nothing but bold.

Considering that consumption tax hike was the biggest key to achieve economic growth, denying negative impact of the tax would be an endorsement of governmental policy. On the other hand, negative news reports on sales in April had to be a firm protest against current attitude of the government on economy. As shown in security policy and “post-war regime change,” economic policy is divisive.

The point is whether this is a good price hike or bad one. Good one brings higher income of families, and bad one is only profitable for major companies. Some predict that true impact of the tax hike will appear this summer. If BoJ is too optimistic, economy will be uncontrollable beyond a matter of further monetary ease.