Japan strong growth paves way for 2nd Consumption Tax rise

Mon 21st Jul 2014

Following a sharp decline in economic performance following the Japanese Consumption Tax rise to 8% in April 2015, growth has returned to the country paving the way for the second rise.

The 2nd sales tax hike to 10% was announced at the time of the first in 2012.  It is part of a plan to help fund the social security costs of a rapidly aging population.  One of the conditions of both tax rises is that the economy is growing at at least 3% per annum.

Latest forecasts suggest Japan will return to 2.7% growth in the second half of 2014, which compares to a near 5% shrinkage in the second quarter of the year.  This was largely due to spending being brought forward to the first quarter in anticipation of the April tax hike.