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Japan retail sales tumble as tax rise takes effect

Japan retail sales fell by 7.1 per cent in October – the greatest single monthly fall in almost five years. 

The reason: the implementation of a sales-tax increase from 8 per cent to 10 per cent on October 1, aimed at helping reduce the country’s public debt, which is running at twice the size of its GDP.

The headline figure was driven by significant reduction in sales of big-ticket items such as motor vehicles and appliances. But department stores and apparel retailers also bore the brunt. 

Japan retail sales fell by 14.4 per cent month on month, higher than the 13.7-per-cent month-on-month decline which followed previous sales-tax increases 1997 and 2014. 

Some analysts, however, have suggested the October decline may have been worsened by weather during the month, which included severe typhoons in the central and eastern parts of the country. There was also likely to be an element of extra spending in September as consumers tried to mitigate the tax effect.

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