A modest drop in home sales recently is a reassuring sign that the October sales tax hike will cause less disruption to the economy than previous tax increases did. Contracts on new property purchases had to be signed by 31st March for the current tax rate to apply. As a result, for many home buyers the tax rise has in effect already happened. While home buyers in the Kinki region did bring forward some condominium purchases to beat the March deadline, the run-up was shorter than in 2014, and on a much smaller scale than 1997. And in the much larger Tokyo region, the run-up and subsequent fall has been tiny. With the government preparing various countermeasures to cushion the tax hike’s impact on consumer spending, this is tentative support for the view that the economy will hold up pretty well come October.
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