Japan is bracing for its first sales tax rise in years, with last minute shoppers buying up a host of goods from gold to ice cream, as the government tries to tackle its crushing national debt.
Millions of shoppers are making a mad dash to stores ahead of Tuesday’s tax rise to 8.0 percent from the current 5.0 percent amid fears the increase could spark the return of a protracted economic slump.
The last time Japan brought in a higher levy in 1997, it was followed by years of deflation and tepid economic growth.
The upcoming hike has created a tricky balancing act for Prime Minister Shinzo Abe as he tries to nudge the world’s number-three economy out of the cycle of falling prices and lacklustre growth with a growth blitz dubbed Abenomics.
On Friday, fresh data showed Japanese consumer prices rose again in February, suggesting Tokyo’s efforts to slay 15 years of deflation was gathering steam.
But the increase was largely driven by rising post-Fukushima energy import costs, rather prices going up on the back of strong, across-the-board consumer demand – dubbed “good” inflation by some economists.
