Japan’s Retail Sales Plummet

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Japan retailJapan’s retail sales fell at their fastest rate in nearly five years in October after the Japanese government raised the national sales tax from 8 percent to 10 percent in an effort to fix the country’s weighty public debt burden, which is currently twice the size of the country’s gross domestic product (GDP).

The tax hike was postponed twice, and concerns have always persisted that the action could cause broader economic challenges, including a lack of growth incentives and a reduction in imports and production. 

Japan’s retail sales plummeted 7.1 percent in October, surpassing estimates for a 4.4 percent decline. The report followed additionally negative data out of Japan this week which shoed that the country’s economy stalled in Q3 and that exports contracted at their fastest pace in three years. The last sales tax hike in Japan, the raise from 5 percent to 8 percent in 2014, also slowed the country’s economy.

According to reports by the Japan Times, the tax hike wasn’t the only factor that caused October’s dismal sales numbers; a typhoon hit the central and eastern parts of the country and prompted stores and restaurants to remain shuttered for some time, which impacted their overall bottom lines.

To offset the tax hike and ease the burden on consumers, some Japanese companies have begun to cut prices, a move which could put threaten smaller businesses or out of business entirely and could threaten the business models of larger businesses as well. The cycle, analysts warn, could create additional economic challenges for Japan’s already struggling economy.

Earlier this month, Japanese Prime Minister Shinzo Abe asked his cabinet to put together a stimulus package that would help build the economy and create the infrastructure to cope with large natural disasters such as the typhoon that hit Japan in October. According to Chief Cabinet Secretary Yoshihide Suga, the package will include options for promoting investment and growth through the use of loans. The package hasn’t yet been finalized. When implemented, this will be the first economic stimulus plan in Japan since 2016. The plan is expected to include measures through 2021.

Sari Holtz began working at DailyForex in 2011 when she was hired to provide daily news analysis and to manage the daily content. Since then, she has continued to provide regular news items that focus on how political events impact the global economy. She also works directly with dozens of Forex brokers worldwide to ensure that they get their messages across and that traders can find the best broker for their individual needs.