Financial News

  • 16 May 2014, 8:11

Japanese Rush To Beat Sales Tax Increase

Japan's economy grew at its fastest rate for almost three years in the first quarter as firms and consumers rushed to beat the implementation of a sales tax rise.

Official figures showed GDP growth at an annualised rate of 5.9% - or 1.5% on the previous quarter.

Economists suggested the performance was mostly down to efforts to avoid extra tax.

Japan raised its sales tax to 8% from 5% on April 1 and the move is expected to have resulted in a quarter-on-quarter GDP contraction in the current quarter though a quick rebound is forecast for the second half of the year.

Prime Minister Shinzo Abe, who took office in 2012, has sought to get Japan's growth back on track through a combination of heavy government spending, ultra-loose monetary policy and economic reforms.

His so-called "Abenomics" formula is credited with boosting corporate profits and helping Japan escape from a long-time deflationary rut.

Price increases are slowly moving toward a 2% official inflation target, thanks to the flood of money in the economy and to higher costs for imports due to a weakening in the Japanese yen.

The recovery in the US and Europe may help Japan increase exports, so far an area that has lagged expectations as soaring import costs for energy, food and industrial components have outpaced increases in demand for Japanese products overseas.

Advertisement