TOKYO, April 8 (Reuters) - The rise in Japan’s sales tax to 8 percent that took effect last week has driven a boom-and-bust in sales of high-priced items like jewellery but passed with little impact on sales of daily necessities, two leading Japanese retailers said on Tuesday.
Takashimaya Co, Japan’s third-biggest department store operator, said the last-minute rush of demand in March had been stronger than the company anticipated, especially for items like watches, jewellery and luxury brands. As a result, Takashima sees a pullback in sales starting this month that will continue through summer, the company’s president said.
Meanwhile, FamilyMart Co, Japan’s third-largest convenience store chain, said its sales were up by about 1 percent over the past week since the tax hike took effect, excluding lower sales of cigarettes which had surged beforehand.
“We think the consumption tax factor will have played out in the March-April period,” FamilyMart President Isamu Nakayama said at a news conference called to announce earnings.
Financial projections by retailers like Takashimaya and FamilyMart will indicate how big a hit businesses expect to consumption after the sales tax hike. That, in turn, will be key to whether the Bank of Japan decides to expand its quantitative easing.
The BOJ stuck to its existing monetary stimulus on Tuesday, saying Japan was on track to meet its 2 percent inflation target by April next year.
But the imposition of the sales tax hike to 8 percent from 5 percent and the prospect of a further increase to 10 percent in 2015 has clouded the economic outlook.
The last rise in the sales tax in 1997 dragged Japan into a recession and depressed private demand for years.
Japanese consumers spent more aggressively on higher-priced items like art works in the run-up to the tax than Takashimaya had expected, based on its experience in 1997, President and Chief Executive Shigeru Kimoto told a news conference.
For April, the retailer forecasts a 14 percent drop in sales, followed by a nearly 6 percent decline in May and then an almost 4 percent drop in the three months to August.
“From April we’re seeing the reaction,” Kimoto said. “The pullback could be a bit more than we expected this month.”
Department stores like Takashimaya saw a spike in demand before the sales tax hike with consumers snapping up watches, jewellery and other big-ticket items.
Takashimaya’s domestic department store sales in March jumped 33 percent from the year before. Isetan Mitsukoshi Holdings Ltd and J.Front Retailing Co Ltd’s Daimaru Matsuzakaya saw spikes of 24 percent and 35 percent respectively.
Last week, Seven & I Holdings Co, operator of the 7-Eleven chain and owner of Sogo and Seibu department stores, unveiled plans for a record pace of expansion at home, unfazed by the sales tax increase.
For its part, FamilyMart said it would look to open 1,600 stores in the current fiscal year, and annual sales at Japan’s convenience stores taken together could grow another 20 percent to become a $115-billion market.
Takashimaya is seeking to cushion the impact of the expected snapback in sales with a promotion offering 1,000 yen coupons on items priced 10,000 yen or more. It said it would look to offset the reduced sales with lower costs, including reduced spending on rent after buying a bigger stake in the building that houses its store in the Tokyo hub of Shinjuku. (Editing by Kevin Krolicki/Mark Heinrich)