Japan Press Weekly

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2014 November 12 - 18 [ECONOMY]

Consumption tax hike heavily affects businesses in 3.11 disaster-hit region

In the Tohoku region, which suffered damages from the 3.11 massive earthquake and tsunami three years ago, nearly half of local businesses were severely affected by the consumption tax hike, a recent survey showed.

A study team of the Tohoku University Graduate School of Economics in August and September conducted a survey of 5,748 companies whose head office is located in Fukushima, Miyagi, Iwate, or Aomori prefectures. The survey asked what kind of factors, other than the 3.11 disaster, affected their business performances. Tohoku University Associate Professor Nishiyama Shinichi on November 8 reported the survey results at a symposium regarding revitalization of local industries.

Of the companies surveyed, 49.8% cited the consumption tax increase to 8% in April as a factor hurting their businesses, 44.1% referred to labor shortages, 36.7% mentioned a rise in prices for materials, and 24.6% noted higher electricity bills, according to Nishiyama.

At the symposium, Nishiyama pointed out that smaller firms are more likely to receive adverse impacts from the consumption tax hike than bigger companies. While 50.6% of companies with less than 21 employees said that the tax increase delivered a heavy blow to their business, the percentage for companies with more than 300 employees stayed at 44.5%.

The associate professor stated that though some local industries, such as farming, fishery, manufacturing, and retail business are showing signs of recovery, the 8% consumption tax rate is hampering overall business recovery from the disaster.

On the other hand, only 7.4% of the respondents said that they benefitted from Prime Minister Abe Shinzo’s economic policies, Nishiyama added.