Sales Tax Increase Impacts Japanese Household Spending

Japanese household spending in April fell at the fastest rate in three years, data showed Friday, in a sign that consumption could be slow to recover from an increase in the nationwide sales tax, raising questions over the pace of economic recovery.

Industrial production fell more than expected in April as companies cut output to avoid a pileup in inventories in the lull after the sales tax increase took effect.

Officials at the Bank of Japan have repeatedly said that they are confident spending will quickly recover because the labor market remains tight, but the bigger-than-expected spending drop in April and a slowdown in factory activity could raise the stakes for monetary policy.

NY Times

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