Consumption tax complications

posted Apr 29, 2014, 8:50 AM by Loose Tube   [ updated Apr 29, 2014, 8:50 AM ]
On the surface, 2014 would appear to be the beginning of a revival. 
With first quarter foreign big bike registrations up 35% despite a weakened Yen and domestic brands up 48% year on year, what could go wrong? 

The motorcycle market in Japan would appear to be reacting to the increase in Consumption Tax (Value Added Tax on the sale of goods) which took place on April 1st. The last increase in 1997 which saw a rise from 3% to 5% triggered a surge in purchases followed by a slump (and government collapse). The current increase from 5% to 8% may well be causing the 1Q bounce and this is supported by media reports of extensive spending in advance of the tax hike.

Meanwhile the Tankan short term indicator of economic confidence has been following a positive trend since the introduction of quantitative easing at the beginning of 2013. However, small, medium and large automotive enterprises are all forecasting a significant down turn in April.

At the same time the consumer confidence index of willingness to buy durable goods has almost dropped to the lowest point experienced during the 2008 economic crisis.

In the bigger economy, eyes will be on the impact of Abenomics and a recovery in sales in the 3Q. Let's see the consequences for motorcycle sales.