Consumers' Reaction to the Consumption Tax Hike and Related Policies: Evidence from a Survey

Author Name MORIKAWA Masayuki (Vice President, RIETI)
Creation Date/NO. March 2020 20-P-008
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This study, using original survey data, documents consumer reaction and evaluation of the consumption tax hike and various policy measures to deal with its negative impacts on consumption. The results indicate, first, that more than 70 percent of consumers cut expenditures in real term, which is consistent with a standard theoretical prediction. Second, consumers positively evaluate the introduction of reduced tax rate for food and refunds for cashless transactions, but the evaluation is heterogenous with household income. Third, more than 40 percent of individuals started using or increased cashless transactions on this occasion. Fourth, substitution of restaurant dining with home cooking in response to the introduction of reduced tax rate for food purchases was limited.