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According to a Reuters survey, more than two-thirds of Japanese companies believe that the pain caused by the government's increase in consumption tax last month is less than that caused by the increase five years ago.
The Reuters business survey supports the view of the Japanese government and the Bank of Japan that the Japanese economy looks likely to avoid a downturn in private consumption by taking measures to offset the potential public impact of the increase in consumption tax.
However, the vast majority of Japanese companies are still cautious about increasing spending, and many plan to keep wages unchanged, keep the number of employees unchanged or even lay off workers.
The survey is the first time that companies have assessed the impact of higher consumption taxes. Japanese Prime Minister Shinzo Abe said the increase in consumption tax was the key to controlling Japan's huge public debt. Abe has twice delayed the increase, fearing that it will squeeze consumer spending.
More than 70% of companies surveyed by Reuters said that whether they stepped up purchasing before the tax rate hike on October 1 or after the fall in consumption, it was more moderate than when the consumption tax was raised from 5% in April 2014. That tax increase hit private consumption, which accounts for about 60% of the economy.
The economy suffered a setback after the consumption tax hike in 2014, when Bank of Japan president Kuroda tohiko said he underestimated the shopping spree and the fall in consumption, as well as the subsequent decline in real income.
Analysts said while the impact appears to be small this time, it could mask the potential weakness in Japan's economy.
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