Japan September household spending surged 9.5% before tax hike

[TOKYO] Japan's household spending surged 9.5 per cent year-on-year in September, official data released on Friday showed, as consumers rushed to complete purchases ahead of a sales tax hike in October.

Household spending is closely watched to gauge if Japan is on target to emerge from decades-old deflation.

The jump - after just a 1.0-per cent rise in the previous month - came as the world's third-largest economy raised consumption tax to 10 per cent from eight per cent on October 1 to address snowballing government debt.

Consumers spent cash on furniture and other durable goods including refrigerators and air conditioners, as well as automobile-related goods, contributing to the 9.5 per cent surge, the Internal affairs ministry said.

Purchases of commuter train passes also contributed to the surge, it said.

Prime Minister Shinzo Abe's government has twice delayed implementing the hike over fears it could hit the country's fragile economic growth.

But despite speculation of a further delay, the hike went ahead as planned on October 1.

Fears that the move could cause a recession have receded somewhat in recent months, and the government insists the increase is necessary to fund key policy priorities.

Historically tax hikes have hit Japan's economy hard.

Both of the most recent increases - from three per cent to five per cent in 1997 and then to eight per cent in 2014 - were followed by recessions.

AFP