The Japanese Sales Tax Hike Verdict Is In: It's A Disaster As Sales Plunge 25%

Tyler Durden's picture

On April 1, as was widely known, Japan raised its sales tax from 5% to 8% - a move many dread could unleash a recession as happened the last time Japan hiked a consumption tax in 1997. A week later the verdict on just how much consumption was frontloaded ahead of the hike is in, as we get the first sales data on the ground. The result is, in short, a disaster: overnight the Nikkei reported that Japanese department store Takashimaya’s revenue in April 1-7 period crashed 25%!

 We for one can't wait to see what Japan's Q2 GDP will be now that consumption has literally fallen off a cliff.

The Nikkei reports:

Retailers watched Japanese shoppers rush to stock up on all sorts of consumer goods ahead of the April 1 sales tax rise, and are now bracing for a corresponding dip in demand. But Takashimaya says it carefully assessed the tax hike's likely impact and is moving to slash costs by around 10 billion yen to ensure profit growth for the year through February 2015.

 

[T]he company is tempering its outlook for the near future. "Insofar as big-ticket products were in high demand before the tax rise, it's possible their sales will fall more than presumed," President Shigeru Kimoto said at a news conference Tuesday. 

 

Indeed, demand has recoiled since the start of this month, with department store sales tumbling 25% on the year during the first week of April.

 

Takashimaya estimates that the combined impact of the drop-off in demand and the tax increase itself will lower fiscal 2014 operating revenue -- equivalent to sales -- by about 20 billion yen and operating profit by about 5 billion yen. As the steady performance of such segments as the Singapore unit and a subsidiary that operates shopping centers will be insufficient to offset this, operating revenue is expected to decline slightly to 900 billion yen.

Luckily, Takashimaya has a plan to deal with this plunge in revenues:

Takashimaya aims to weather these headwinds with sizeable cost cuts, targeting rents as one area for savings. Since the start of the year, the company has spent nearly 120 billion yen to acquire properties that house a number of its department stores. The move is expected to save just over 3 billion yen in rent annually.

 

The corporation will cut back on other costs, including personnel expenditures and advertising fees as well, aiming to save about 7.3 billion yen at its department stores and around 2 billion yen for its group companies.

In other words, the company is about to unleash a "rationalization" campaign, better known as wholesale firings. But, but, what happened to those wage hikes that Abe swore up and down were coming and are so critical for the absent third arrow of Abenomics to finally emerge. Or maybe instead of wages surging, they meant unemployment? Happens - it was lost in translation.

Finally, according to Nikkei, other retailers were also impacted with Parco April 1-7 same-store sales dropped 7%, Daiei sales fell 8-9%, FamilyMart -5%.

That's ok - they too have "cost-cutting" programs in place.

As for what happens to the Japanese economy, and stock market, next, here is a reminder from our article from last week: "What Happened The Last Time Japan Raised Its Consumption Tax?"

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GetZeeGold's picture

 

 

Who could have seen it coming really?

ilion's picture

Yapanese Yen has actually got stronger last days against USD.

Is it some repatriation by the Japanese? Selling overseas investments, converting the funds to Yen to bring them home and then buying physical gold? Or do they by iPhones?

Headbanger's picture

Don't be surprised to see a national sales tax enacted here especially since NObody is actually paying thee Obozocare tax.

 

dcj98gst's picture

Nope no more taxes.  Just printing and more debt.  Why worry China and Russia love to buy our debt... they just love us or something like that.

Smegley Wanxalot's picture

It's not that they dont want to pay the obozocare tax, but the weather has been so bad that nobody can get out of the house to log in to healthcare.gov.

duo's picture

Takashimaya is like the Nordstrom of Japanese retailers.  Interesting to see the high-end get hit like that, but then again, these are discretionary purchases most likely, not food or fuel.

post turtle saver's picture

wow, a negative incentive to consume acts like a negative incentive to consume... big fucking surprise to no one except dumbasses in government who think actions don't elicit reactions... same as it ever was... maybe if they make it illegal to not spend they'll finally get the result they're looking for... fucking morons

rubiconsolutions's picture

Just wait and see what happens if the idiot 'Fair Tax' people get their way in the US. It's a consumption tax just like Japan's. Einstein was right, doing the same thing over and over again and expecting a different result. Maguro anyone? With a side of iodine dipping sauce of course.

Sudden Debt's picture

But GAAP??? GAAP TIMES GAAP??? I'm sure we can rig the numbers if we want to...

Companies do it, so why not countries?

Professor Fate's picture

I would say they have reached "Max Tax" where discretionary income can no longer support tax increases.  And we are there too.!

Fate the Magnificent
"Push the Button, Max" 

mayhem_korner's picture

 

 

Never underestimate the power of the central planners to tax.  It is what they live for.  Currency debasement is the preferred means of taxation at this point.  Until fiat goes to zero on the Kelvin scale, there is more room to tax.

Professor Fate's picture

A very valid point.  But the consumer well is dry and there are no spring rains on the horizon.  Rents increase, food increases, transporation increases, and weekly payroll hours are cut for those that can find employment.  Everyday, the implosion (the Great Reset) gets closer.  Almost out of smoke and mirrors (or Hope and Change).

Fate the Magnificent
"Push the Button, Max'

fonzannoon's picture

clearly abenomics is a abysmal failure and as their economy implodes and demographics continue to decline the Nikkei will crash horribly. Obviously it's time to buy the yen.

Greenskeeper_Carl's picture

Yep, and we are probably due for a Paul krugman article any day telling us what went wrong. Obviously the problem will be that they didn't do enough. Not enough stimulus, and doubly the money supply im two years just wasn't enough. They needed to create more debt, to help get rid of the debt.... Or something like that. As long as krugman says he understands, I really just have to take his word for it....

booboo's picture

Invade Manchuria, That'el fix it.

 BANZAI!!!!!

Cangaroo.TNT's picture

Bullish!  Future sales can only go up from here!  Welcome to Recovery Spring of 2014 (TM)!

Bill of Rights's picture

Don't eat, Drive or heat your home your all set...Inflation is mute.

Beef prices hit all-time high in U.S. - latimes.com

valley chick's picture

And pork prices rising too. As I have already prepared for the hgher prices that were already mentioned here on ZH, it still is a sticker shock. 

NoWayJose's picture

Get your beans, bullets, and bullion before the taxes go up in the US too.

ArkansasAngie's picture

You want inflation?  I'll give you inflation.

Yen to 115 ... just as the Abester predicted?

Concerted Central Banker moves?  How about a global reset ... the shits on you China.

Smegley Wanxalot's picture

Wait, are you telling me people are not willing to pay their "fair share" as determined by the overlords?

I am shocked!  SHOCKED, I say!

Savvy's picture

I'm disappointed sales didn't drop 100%. People need to vote with their wallets or this shit just gets worse and worse.

Smegley Wanxalot's picture

Agreed.  As an example of voting with my wallet, last year I got a ticket for doing 1mph over the limit (no shit) which ended up costing me about $170 plus 7 hours on a Saturday after all was said and done.  To retaliate for such an absurd ticket, I reconsidered my upcoming purchases (including a new car) and literally decided not to do most of them, which thus has since then taken about $4000 out of the TX state treasury in sales taxes, and I will do more damage going forward.  I plan to directly take out about 50 times more from those government assholes than they cost me, at least. 

Add to that, fewer purchases = fewer jobs = more indirect damage.

Fuck the goddamn system.

Greenskeeper_Carl's picture

That won't be welcome news that cops in TX are writing tickets like that for 1 over the speed limit. People seem convinced that state is some kind of libertarian utopia, the last bastion of freedom in the increasingly police state US. I keep saying its no better, just get greeted with red arrows and erroneous statements like "don't mess with Texas". Never an explanation as to how it's different. With Rick fucking perry as governor.

Smegley Wanxalot's picture

Pissed me off more because that was my 1st ticket in 25 years of driving.

May have been the asshole cop acting on his daily quota (the quotas that they all deny exist) and to be fair, the ticket was given in the People's Republic Of Austin (the leftist govt-humping toilet).

As for Perry, he's a great gov if you are one of his cronies (particularly a toll-road crony) but in reality he was the better choice in the last election.  This year, we'll have a choice between an a Perry-clone and an obama-cock-sucking-wart-faced cunt who is intellectually unqualified to even breath air and whose sole claim to fame is being pro-abortion up until a kid's 5th birthday... so Dumbass A or Dumbass B.

Still beats California, though.  Long term I am out of this fucking tyrannical country anyway.

Darksky's picture

Get the fuck outta Austin man. Got pulled over on FM1493 in Katy last month doing 63mph in a 45mph zone and the cop gave me a warning. Regarding you getting one ticket in 25 years, damn thats impressive. virginia raped me for a Reckless Driving by speed doing 85 in a 65 and that ticket cost me $1750 (got a lawyer to prevent the additional possible 6 months jail time and 12 months license suspension). In 1 year in NOLA i got 2 tickets in a school zone that was not posted and the judge didnt care, each ticket was +$500. Now those are tickets to bitch about....

Instead of getting back at those states by not spending, i one upped u, by just fucking leaving. louisiana lost about $15000 in income taxes per year and virginia lost +$40000 in income taxes. That doesnt include property and sales taxes.

SilverRhino's picture

That explains it.  Austin :  the liberal fucktard town of Texas. 

Based on 20+ years of driving in Texas there are the following rules.  

  • Under 55 : Take 4mph. 
  • 55 or over: 
  • (before the 20th of the month) take 9mph.  Texas cops pull you over at 11+ 
  • (20th - end of month) take 4mph.
  • Driving exactly the speed limit actually increases the odds that someone will pull you over especially at night.   
  • 20mph speed limit in a shcool zone:  Take ZERO.  That's the speed limit they are deadly serious about. 

 

813kml's picture

Wow, I'm surprised that you couldn't get out of that ticket.  I left Austin about a year ago, but lived in the downtown area where it's unlikely for a white guy to get pulled over unless he's dragging a dead body.

I miss Austin but it is has already been annexed by California.  Real estate has been driven through the roof by the L.A. crowd who are all flash (and credit) and no cash.

Smegley Wanxalot's picture

I'd have fought it but I was just starting a new job and didn't want to ask for time off to deal with it, plus I needed to do job-related traveling which complicated it.  Otherwise, you bet I would have fought that shit - there is no way to measure that accurately

Don't live in Austin, only near but west of town and out of that fucked up county in Hill Country. Fuckin gestapo assholes run Travis County and they can all fuck off, like government everywhere.

Mercury's picture

On April 1, as was widely known, Japan raised its sales tax from 5% to 8%

 

But they want to increase the velocity of money and inflation right?

 

What's the Japanese for:

YOU SUCK AT CENTRAL PLANNING!  ??

post turtle saver's picture

bingo, dead on... they want more consumer activity and less saving so what do they do? they TAX CONSUMER ACTIVITY and give people an incentive to save their money instead! absolute fucking genius...

Uchtdorf's picture

You asked:

What's the Japanese for:

YOU SUCK AT CENTRAL PLANNING! ??

Having lived in Japan for 8 years, I can answer that.

omae no chuuou shireigata keizai ga saitei da yo!

Obviously what's needed in Japan is to call out Godzilla. The Japanese have paper windows so putting the Krugster solution in place won't work there. Get Godzilla active. Think of all the broken stuff! Why, they could employ thousands rebuilding Tokyo Tower alone after GOJIRA tears it down. (Why do they keep rebuilding it only to see it get knocked down the next time they make a movie?)

 

ZeroPoint's picture

Tax donkeys will not drink.........

q99x2's picture

Sales are down because of the earthquake weather. We're having a bout of it in SoCal too.

Rainman's picture

LA sales tax 9% , even worse than SF @ 8.75% .

the not so mighty maximiza's picture

the only way to fix this is to tax people who refuse to buy stuff, right you sick fuck political class?

Smegley Wanxalot's picture

I can actually see them doing that.  You file taxes and declare X income. Prove that you have spent 90% of X or more, or pay a "fine."

Judge Roberts says that's cool and the precedent is already set with one product, so soon they will expand it.

Uchtdorf's picture

More like 105%. How do you think the squids will earn their bonuses?

WINNING!

agstacks's picture

Nah, it's probabaly just the weather, or radation or something..

 

It will improve as the toxic cloud moves offshore!

Iam Yue2's picture

It only took Japan five years to recover in 1997.

So, Abenomics;

1. Depreciating Yen translates into a sluggish recovery in export volume . Companies refuse to invest in Japan and do not buy into the story of an ever weakening Yen. They look for a quick profit.

2. Ever declining consumer sentiment. Consumers, ignore foreign investors and refuse to buy into the illusion that is Abenomics.

3. No massive surge in sales ahead of the introduction of sales tax.

Odds are now shortening on additional easing at the late April MPM.

AdvancingTime's picture

Poor sad little Japan. When the yen drops faster than the Japaneses stock market rises it will no longer protect the wealth of those invested within its borders. Japan is the most indebted developed country in the world and its future prospects are dim and getting worse. It is only a matter of time before the yen becomes worthless.

As inflation begins to take root it will place upward pressure on Japanese bond yields and raise the cost of government to service its massive debt. With the BOJ  set to absorb half of the government bonds planned for sale this fiscal year, domestic investors have already started venturing overseas for higher yielding assets. If this turns in to a tsunami of  money fleeing Japan it will constitute the end of the line for those holding both JGBs and the yen. More on this subject below,

http://brucewilds.blogspot.com/2013/08/japans-economy-going-forward.html

dcj98gst's picture

Shit that is just the weather!  I think it snowed in Japan this year.

Van Halen's picture

It actually snowed in the department store.

The Wisp's picture

Never trust a country who's sexual Identity is staring at little girls inside a school yard fence

813kml's picture

They're just trying to put a face to the used panties they bought from a vending machine.