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Economy & Business

Low Consumer Spending Hinders Japan's Economic Recovery

ARUN RATH, HOST:

A big aim of Japan's effort to revive the economy is to get consumers to start buying again. Consumers are spending a little more, but apparently not enough. NPR's Anthony Kuhn reports from Tokyo.

ANTHONY KUHN, BYLINE: Consumers here in Tokyo's bustling Shibuya District say the government's decision in April to raise the country's sales tax from 5 percent to 8 percent had varying effects on them. One young man, who only gave his last name, Shinozaki, says he feels the impact when any price goes up, even for a pack of cigarettes. He and his girlfriend say they are in no financial position to start a family.

SHINOZAKI: (Through translator) Although prices are rising, our salaries are not going up. Therefore, we can't make the decision to get married. This is why our generation is unable to spend much money.

KUHN: Shinozaki works through a temp agency. He's part of the one-third of Japan's workforce that holds temporary or part-time jobs with little job security. Down the street, housewife Miwa Shibata is doing slightly better. She says the 3 percent hike in the sales tax doesn't stop her from making everyday purchases.

MIWA SHIBATA: (Speaking Japanese).

KUHN: It's not so much the impact on our daily lives as it is the mental impact, she says. Most days, I go to culture classes and then have some tea. The tax doesn't effect that. The tax's biggest impact is psychological, and some folks can't accept it. Weak consumer confidence has hit big-ticket purchases hardest. Last quarter, private home-buying slumped by 24 percent. Some critics blame companies for not sharing their profits with workers in the form of higher wages. But Hiroshi Miyazaki, a senior economist at Mitsubishi UFJ Morgan Stanley in Tokyo, says that over the past decade and a half, prices kept falling, so workers had no reason to ask for a raise. Now he says that's changing.

HIROSHI MIYAZAKI: (Through translator) Companies are now gradually beginning to notice that they cannot hired skilled workers without paying higher wages, unlike during the past decade or so. In the future, I believe we'll see the trend of rising wages becoming clearer.

KUHN: Prime Minister Shinzo Abe has called snap elections for next month as a referendum on his economic policies. Miyazaki warns that if Abe's bid fails, and his policies are put on hold, it could spell trouble for any economic recovery. Anthony Kuhn, NPR News, Tokyo. Transcript provided by NPR, Copyright NPR.

Corrected: November 25, 2014 at 11:00 PM CST
In this report, we say Japan's sales tax has increased 3 percent. In fact, it has increased 3 percentage points.