Monday, March 10, 2014

Tax Increase! The Sky Is Falling!!

First, my computer is still being repaired, and this blog turns out to be difficult to manage with only a tablet. I would have written a long LASIK surgery post; instead I'll just tell you I'm still dependent on glasses for close-up seeing but see great in the distance so I'm really happy I went ahead with it.

Anyway, Japans sales tax will increase from 5% to 8% come April. This turns out to be an interesting case study in human behaviour. There is something of a rush to buy stuff before the deadline in a few weeks, even though it makes little sense for most products. For some reason, toilet paper is especially popular; our local store has even run out a few times the past couple of weeks. This is of course insane.

First, the raise is three percentage points only. That is tiny. A brand-name toilet paper pack costs around 5-600 yen so it will be only about 15 yen - about 15 US cents or 1 Swedish crown - higher come April 1st. What's more, it's a typical sale item; if you wait a while or shop around you can easily save a hundred yen or more. It's just hoarding behavior in other words, and has nothing to do with the price increase in itself.

And most other items similarly make little sense to buy specifically for the tax increase. Low-cost items just won't change price enough to make a difference. Appliances are expensive enough, but you'd save much more buying them during a regular sale than you'd ever save now, and many high-cost items such as full-size cars or real estate have fluid prices that depend mostly on your ability to shop around and to negotiate a deal. Indeed, it seems some prices have even been increasing from the surge in demand, and will probably be cheaper in April, not more expensive.

If you must take advantage of this, your best bet is expensive items that rarely or never go on sale, and that you were already planning to buy in the near future. Books, for instance, especially expensive textbooks and non-fiction. High-grade camera lenses and telescopes, professional tools, racing bicycles and some other sporting equipment probably make sense too. LASIK surgery and other professional services that are unlikely to simply absorb the extra cost.

For now I will avoid the rush, buy nothing, sit back and enjoy being a spectator.


Derek Blais said...

I agree. I was quite surprised by this hoarding behavior, especially for items like toilet paper and paper towels. Even more interesting, for tech, some people don't consider that as tech advances, it also becomes cheaper. It makes no sense to rush to your local electronics store to buy a computer (now) just because taxes are going up 3% next month.

Jan Moren said...

Especially as large chains apparently plan point-increase campaigns after April 1st to offset the cost. It may well end up cheaper to buy stuff in April than now in March even if the base price doesn't change.

Jordi Pujol said...

5%, 8%! Didn't know it was so low, compared to EU standards
Spain (as most Europe) is at 21%. We sat at 16% before the recession.
Consumers have nothing else than reluctantly accept it.

Japan's prices are high, or at least the reputation is such in here.

I should have saved to buy that 6x9 Fujica off eBay a while ago ;)
Time to buy the new washing machine perhaps?

Jan Moren said...

Many prices are fairly high in Japan; it is due to things like high import tariffs and small-scale farming. But it has also been due to the relatively expensive yen, and that's dropped a lot the past couple of years. In fact, some tourists actually buy stuff here to resell for a profit back home.