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Japan slumps following Consumption Tax rise

  • VAT
  • 12 August 2014 | Richard Asquith

Japan slumps following Consumption Tax rise

The Japanese economy underwent a 6.8% drop in the second quarter of 2014 following the Consumption Tax rise from 5% to 8% on 1 April.  This drop wiped out the 6.1% growth in the first quarter of the year - much of which was created by advance purchasing by consumers ahead of the long-planned sales tax rise.

Whilst a big fall in this quarter's figures was anticipated, the extent of the drop will raise concerns.  The Japanese Consumption Tax rise was implemented to help meet the social security costs of the country's aging population, and a second rise to 10% is pencilled in for October 2015.

If there is not an immediate big rebound in the Q3 economic performance, it is likely that the Bank of Japan will be forced into injecting more money supply into the economy.  Japan already has a Quantitive Easing program me.  Currently, forecasters have indicated a growth rate of up to 5% in July to Sept.


VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.