‘Japan business confidence falls’

The Bank of Japan says the country’s business confidence slowed down sharply for the April-June quarter after prices increased due to a sales tax hike.

According to the Tanken survey carried out by the Bank of Japan, business confidence among manufacturers plunged five points to +12 for the April-June quarter following a sales tax hike introduced in April.

The decline is the first since Prime Minister Shinzo Abe took office in late 2012.

The Tankan reading for large companies in the non-manufacturing sector in the March quarter also fell to +19 from +24, which is the first downturn in six quarters.

The survey, which studied more than 10,000 companies, is a good indicator of how Japan’s economy is coping with the impact of the first sales tax rise in 17 years.

Japan increased its sales tax to 8.0 percent from 5.0 percent on April 1. The government’s decision made many consumers rush to the stores ahead of the rise. Although the decision decreased consumers’ spending in the following months, many believe that the rise was essential for Japan’s economy because of its big national debt.

Abe came to power to change a condition of ever-decreasing prices and lackluster growth, a condition which made the consumers put off their purchases in the hope of later getting goods for cheaper prices. However, many say that the rise can hamper Japan’s economic growth and derail Abe’s plan for turning the economy around.