Most Japan households plan to cut spending after tax hike: BOJ survey

FILE PHOTO: People walk past a sale sign in a shop at a shopping district in Tokyo, Japan, July 20, 2018. REUTERS/Kim Kyung-Hoon/File Photo

TOKYO (Reuters) - Nearly 70% of Japanese households expect to cut back on spending after an increase in the sales tax rate this month, a central bank survey showed, adding to headwinds for an economy grappling with slower global demand due to the U.S-China trade war.

The survey also showed 37% of households front-loaded spending ahead of the tax hike to 10% from 8% to avoid the heavier levy, with purchases centering on daily necessities and cars.

The results of the survey cast doubt on the Bank of Japan’s view that robust domestic demand will offset some of the pain from weak exports and underpin a fragile economic recovery.

The data will be among factors the BOJ will scrutinize at its rate review on Oct. 30-31, when some analysts project the central bank could loosen monetary policy to fend off risks to the economy.

An index gauging household sentiment about current economic conditions fell to -26.0 in September from -25.0 three months earlier, worsening for a fifth straight quarter and hitting its lowest level since June 2016, the survey showed.

Household sentiment about the outlook for a year ahead also worsened, falling to -41.7 in September from -36.1 in June and marking the lowest level since December 2008.

“Summer bonus payments weren’t very good,” a BOJ official told a briefing, adding that this in tandem with a slide in stock prices could hurt household sentiment.

The quarterly survey was conducted between Aug. 8 and Sept. 3.

Reporting by Leika Kihara; Editing by Chang-Ran Kim and Edwina Gibbs