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Japan: Consumer spending skyrocket
  • Vitaliy_KiselevVitaliy_Kiselev

    Japan's economy contracted in the second quarter at the fastest pace since 2009, dealing a blow to Prime Minister Shinzo Abe's efforts to re-energize the economy with pro-growth steps.

    Revised data released Monday showed that the country's gross domestic product contracted an annualized 7.1% in the April to June quarter from the previous three-month period as businesses as well as consumers retrenched after the government raised the sales tax. Preliminary figures showed a 6.8% decline.

    While purchases of big-ticket items such as homes, cars and TVs soared in the run-up to the first sales tax rise in 17 years, they plummeted once the higher levy took effect on April 1.

    The revised data showed that second quarter consumption dropped 5.1% with business spending falling by the same percentage.

    http://online.wsj.com/articles/japan-economy-shrinks-7-1-annualized-in-april-june-1410134506

  • 2 Replies sorted by
  • TronTron

    We tried the tax and spend approach here and it quickly finished off what was left of the middle class (along with printing the shit out of Federal Reserve Notes). Good luck with that, Japan... I'm sure this time will be different!

  • v10tdiv10tdi

    But wouldn't this be expected behavior and results with announced tax increase like this? The anticipated tax increase encourages consumers to accelerate spend for what they know they need/want in short-term - especially big cost items. Naturally results in large spending drop when tax effective - especially when measured against preceding quarter. What about rolling 12-month window? I guess no matter what, increased taxes would expect to reduce demand...key will be rate of spending recovery in future quarters (assuming it recovers at all).

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