Prior to the consumption tax increase last Tuesday, from 5 percent to 8 percent, Japanese consumers were spending to beat the band. The local business magazine Economist (not to be confused with the English language newsweekly) reports that ¥4 trillion was spent on goods and services in recent months because of the looming tax hike, and estimates "premature spending" will translate into big losses for a lot of companies by the end of the year. A strategist for Daiwa Securities told Asahi Shimbun two weeks ago that the pre-tax increase spree was bigger than expected, and predicts sales of certain goods will "grind to a halt" over the next several months. Financial journalist Nobuko Takahashi told the same newspaper that the "hoarding" brought on by the rush could even lead to health problems. If people stocked up on food and beverages, especially the alcoholic kind, they will feel compelled to consume those products more quickly and in larger amounts than they normally would.

When it comes to durable goods it's likely that prices will drop so low by the summer that the tax increase won't make a difference, but you don't really need an economist to tell you that. Anyone with an elementary understanding of supply-and-demand can see that prices are bound to go down if consumers suddenly stop shopping, and yet the public acted as if it couldn't help itself, because, as Tokyo Shimbun columnist Minako Saito pointed out, the media was focused on the inevitable rise in the tax at the exclusion of all other considerations, like the fact that small businesses can't pay their share fair in the first place. Of the ¥593 billion in delinquent taxes recorded by the government in 2012, 54 percent was made up of unpaid consumption taxes.

Akihiko Matsui, who works at the Economics Research Center in the University of Tokyo, explained in Asahi how the "addition to price" (kakaku tenka) that reflects the tax hike works. At every stage of distribution, the seller has to collect a tax from the buyer and eventually hand it over to the government. A retailer who pays the levy to the supplier of a given product or service in turn adds that amount to the price of the product when he sells it. But demand for that product may decrease as the tax goes up, thus pushing the price back down. Matsui says that in the real world the retailer and the consumer split the tax since the seller offsets the hike with a slight discount in the price. He cites a survey by a Tokyo merchants association which found that only 60 percent said they would pass on the tax hike in full to consumers. Many also said they would probably make adjustments by increasing frequency of bargain sales or rates of discount for those bargain sales, or by offering bonuses for membership point programs.