Middling demands for cars, homes in Japan as tax hike looms
WITH the consumption tax hike approaching next month in Japan, retail companies are expecting last-minute demand for daily commodities and furniture to grow toward the end of September.
In contrast, demand is not that strong in the automobile, housing and other industries where the government took measures to contain it. These industries are looking ahead to their sales after the tax hike.
Benefits to bulk purchases
Drug store chain operator Cocokara Fine Inc is focusing on sales of daily commodities that can be stockpiled, such as toilet paper and detergents. The company has held a campaign since last month in which the more customers buy, the more benefits they get, such as higher values for travel, meal and other coupons awarded by lottery.
The effects of this campaign are being felt, with a company official saying, “Per-capita sales are gradually increasing.” Cocokara Fi ne pl a ns t o increase stocks of not only daily commodities but also cosmetic products and health food toward the end of this month.
Furniture retailer Nitori Co widened its range of discounted products on Friday. Since July, the company has reduced the prices of some large furniture, such as tables and beds, by up to 20 per cent. On Friday, the company increased the number of products eligible for the discounts to 288 items, or about 2.5 times the previous number.
Beer companies, which saw sluggish sales in July due to bad weather, plan to increase production in anticipation of last-minute demand before the tax hike.
For example, Kirin Brewery Co is set to increase production of beer and beer-like beverages such as the hot-selling third-segment, quasi-beer product Honkirin for households by 20 per cent this month from the previous year. It will also implement a campaign with giveaway items.
Inageya Co, which operates supermarkets mainly in the Tokyo metropolitan area, expanded sales spaces for alcohol drinks in some stores to encourage consumers to buy them in bulk.
Among electronics retail stores, BicCamera Inc, said sales of organic EL TV sets doubled year-on-year last month, while those of drumtype washing machines grew 50 per cent and refrigerator sales rose 30 per cent from a year earlier.
Some look to post-hike sales
However, this last-minute demand is low compared to that before the previous tax hike from five per cent to eight per cent in April 2014. This is mainly due to the introduction of a reduced rate to keep the consumption tax rate at eight per cent for foods, beverages and other products.
Government measures have been particularly effective in the automobile i ndustr y, which suffered a drastic sales decline after the previous tax hike.
From next month, the government will abolish the existing automobile acquisition tax and implement a new system under which the better a vehicle’s fuel performance is, the more the tax is reduced. Thanks to these measures, people may be able to buy cars for less after the consumption tax hike, which helps contain last-minute demand.
The automobile industry is already focusing on its sales from next month on.
On September 1, Honda Motor Co changed the consumption tax rate used on its website for calculating simple price estimates on new cars, increasing it to 10 per cent from eight per cent. This is because the consumption tax applied to new cars is determined not by the date of the purchase contract, but by the date the car’s licence plate number is registered.
While it is possible to register numbers before the end of this month, depending on the vehicle model, it takes about a month on average from contract to registration.
“T here a re ma ny c a s e s where the 10 per cent ta x rate will be applied, so we changed the ta x rate,” a Honda Motor of f icia l said.
At the Itabashi main branch of Kanto Mazda Co, which operates Mazda’s dealers, customers discussed price estimates using the 10 per cent consumption tax rate on Saturday. Most of the car models for which contracts are now being concluded at the branch, located in Itabashi ward, Tokyo, will be registered from next month on, according to the branch.
The housing industry is in a similar situation. Due to the government’s expanded tax breaks on housing loans after the tax hike and other measures, most housing companies say last-minute demand is limited compared to the previous tax hike.
In contrast, electronics retail stores are apparently considering post-hike campaigns because last-minute demand has been lower than expected. The current belief is that the later such campaigns are announced, the more benefits they will bring to retailers.
In addition, announcing such campaigns before the tax hike could discourage consumers from buying, according to an electronics retail store. Companies are therefore taking a wait-and-see attitude.