Tags: japan | diaper | shortage

Japan Diaper Shortage Caused by Sales Tax Hike, Chinese Demand

Image: Japan Diaper Shortage Caused by Sales Tax Hike, Chinese Demand

By Angela Deines   |   Tuesday, 01 Apr 2014 03:52 PM

Japanese retailers have reported shortages of diapers in recent months and the result has created a “grey market” for the necessity, according to Reuters.

The sharp rise in the sales of diapers and other consumer goods came in just before Japan’s national sales tax was increased from 5 percent to 8 percent, the first such hike in 17 years. However, the news of the sharp increase in consumer goods has been tempered with news that there could be an equally sharp decrease in spending in the near future.

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In 1997, a similar situation occurred when Japan’s sales tax went from 3 percent to 5 percent and then consumer spending “fell off a cliff,” Reuters reported.

"Real household income will be squeezed after April by a greater degree than last time because of the bigger rise in the sales tax rate," said Yasuo Yamamoto, senior economist at Mizuho Research Institute, Reuters reported.

Kenji Yumoto, vice chairman of the Japan Research Institute, believes any drop in consumer demand this time won’t be as stark as it was 17 years ago.

"I expect that the pullback in demand will be smaller than it was in 1997," he said.

Also different than in 1997 is the surge in the demand for diapers. That’s because of increasing numbers of Chinese who have rising incomes. Despite quotas that have been enforced, there is still a shortage for Kao Corp's 'Merries' brand diapers and the Japan-based Papasu drug store chain has struggled to keep the Merries diapers on their shelves.

"We have Chinese customers buying packages of Merries, and even when we set a one-package-per-person limit, they come back again to buy more," said Koji Toyama, a Papasu employee, according to Reuters.

Chinese consumers are willing to pay more for the Japanese-made diapers, even preferring them over Chinese-made diapers.

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