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Japan national sales tax to rise, with nary a hint of protest

March 28, 1997

TOKYO (AP) _ The last time Japan imposed a national sales tax on consumers, homemakers balked, opposition lawmakers condemned the levy and some city assemblies threatened not to enforce it.

Come Tuesday, Japan’s consumption tax goes up from 3 percent to 5 percent, the first time it has been raised since it was introduced as part of an overhaul of Japan’s tax system in 1989.

Shoppers are taking it in stride.

``There’s nothing you can do about it,″ said office worker Norie Suzuki, 55, as she strolled out of Seibu department store in downtown Tokyo. ``Things won’t be that much different.″

But the upcoming tax increase set off a spending spree, with department stores expanding their hours to accommodate throngs of shoppers squeezing in purchases before April 1.

``I want to do my shopping before the month ends,″ said Yoko Obara, 22, as she looked at a Seibu shoe display. ``It’s only 2 percent, but I don’t want to pay more for no reason.″

And there are some fears that the increased tax _ and the rollback of temporary residential and income tax cuts also coming on April 1 _ could deflate the economy’s mild recovery from a long slowdown.

Nomura Research Institute predicted in a recent report that the tax hikes and government moves to cut the budget deficit could depress demand by 10 trillion yen ($81.3 billion) in the upcoming fiscal year.

The last increase triggered protests and the upcoming increase was an issue during the fall parliamentary election campaign, but since then it has dropped off the radar screen.

One reason could be the glaring budget deficit. After several years of trying to jump-start a slow economy with fiscal spending, the government now faces accumulated debts of $3.9 trillion.

The tax hike will help. The new consumption tax will bring in an estimated $29.3 billion in additional revenue, while the tax cut repeal will add $11.4 billion to that.

Plus people already are accustomed to the sales tax. In 1989, consumers for the first time had to deal with awkward prices, dig through pockets for 1 yen coins and wait on long lines as cashiers fumbled with the new system.

The new tax comes at a time when Japanese consumers _ longtime victims of some of the world’s heftiest price tags _ actually have been enjoying lower prices on some items over the past year.

It also won’t be much of a surprise.

``The reality is that the consumption tax has been known about for three years,″ said Russell Jones, an economist with Lehman Brothers Japan Inc. The tax was approved by Parliament in 1994, and the Cabinet gave the OK last year.

After all that, it’s not at all certain that the tax will have much of an impact on the recovery, which, thanks to the weak yen, is riding heavily on booming exports of autos and other goods _ all out of the reach of the sales tax.

Update hourly