Bank of Japan Governor Haruhiko Kuroda speaks during an interview at BOJ head office in Tokyo. Photo: AFP/ Yomiuri Shimbun

If there was one thing that sent more shivers running down the spines of Bank of Japan officials than Godzilla trampling on Tokyo, it was the sales tax hike implemented after much agonizing on October 1.

Their fears appear to be justified.

Early data – the Consumer Price Index in Tokyo, a leading national indicator – shows that inflation in the metropolis rose just 0.5% year-on-year. That is well short of the BOJ’s target of 2%, and also falls below a median forecast of 0.7%, Reuters reported.

As a result, Reuters noted, the BOJ may have to trim its annual inflation forecast.

Twice delayed, the sales tax raise – from 8% to 10% – was the first in five years, and previous hikes have had negative impacts.

Even so, the latest rise was deemed essential to help Tokyo raise cash, notably to pay down Japan’s ballooning public debt and also to fund public services, such as free pre-kindergarten education. The tax applies to most items, though many foodstuffs are exempt.

The central bank faces a tightening bind.

Years of ultra-loose monetary policy and near-zero interest rates have hit financial institutions but failed to lift inflation. Wages, too, have remained stagnant.

The latest numbers suggest the BOJ will have to continue with stimuli, despite the dwindling supply of ammunition in its war chest.

But there is some good news. While previous sales tax raises impacted spending, local consumer demand appears to remain strong.

And on the overseas front, there are hopes that the Beijing-Washington trade war – which is causing Tokyo’s export-heavy economy some grief – will ameliorate.

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now. 

Join the Conversation

12 Comments

  1. Have you ever considered publishing an e-book or guest authoring on other websites?
    I have a blog centered on the same information you discuss and would really
    like to have you share some stories/information. I know my visitors would enjoy your work.
    If you’re even remotely interested, feel free to send me an e mail.

  2. Admiring the hard work you put into your website and in depth information you provide.

    It’s nice to come across a blog every once in a
    while that isn’t the same unwanted rehashed material. Wonderful read!

    I’ve bookmarked your site and I’m including your RSS feeds to my Google account.

  3. First off I want to say terrific blog! I had a quick question which I’d
    like to ask if you don’t mind. I was interested to know how you center yourself and clear your mind prior to writing.
    I’ve had a tough time clearing my thoughts in getting my ideas out there.
    I truly do take pleasure in writing but it just seems like the first 10 to 15 minutes are generally wasted
    just trying to figure out how to begin. Any suggestions or tips?
    Kudos!

  4. Have you ever thought about including a little bit more than just your
    articles? I mean, what you say is valuable and all. But imagine if you
    added some great visuals or video clips to give your posts more, “pop”!
    Your content is excellent but with pics and clips, this website could certainly
    be one of the greatest in its field. Amazing blog!

  5. I don’t even know how I ended up here, but I thought
    this post was good. I don’t know who you are but definitely you’re going to a
    famous blogger if you are not already 😉 Cheers!

Leave a comment

Your email address will not be published. Required fields are marked *