The first stage of the sales tax hike next April will likely put a major drag on growth this year, although the nation will avert an outright recession, economists say.
"The consumption tax hike will be the biggest factor when forecasting Japan's economy in 2014," said Yasunari Ueno, chief market economist at Mizuho Securities Co. "Assuming that wage increases will be minimal after the hike, consumer spending is highly likely to lose momentum," he said.
Many economists predict that gross domestic product in real terms will rise less than 1 percent for fiscal 2014 starting in April.
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