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31% of top companies predict economy will recover until sales tax hike in Oct.


TOKYO -- Thirty-one percent of companies covered in a recent Mainichi Shimbun poll said they expect the Japanese economy, which has seen a historic period of expansion lasting more than six years, to continue recovering until around October this year, when the administration of Prime Minister Shinzo Abe plans to raise the consumption tax from 8 percent to 10 percent.

The ratio of companies anticipating the economy to continue picking up was 5 percentage points lower than in the previous poll released in January last year. The results of the latest survey, covering 123 major companies between mid-November and mid-December 2018, indicate that there is growing sentiment among some leading Japanese corporations that the tax hike will push down the economy. This is in spite of the government's plan to spend as much as 2 trillion yen to avoid such a downturn.

When asked how long the current economic recovery will continue, 31 companies, or 25 percent, answered that it will last until the summer of 2020, when the Tokyo Olympics and Paralympics will be held. Sixteen corporations, or 13 percent, expect growth to continue until around the end of 2020, while 10 firms, or 8 percent, projected that the upsurge will continue until 2022 and beyond.

Many business-to-consumer industries expressed concerns about the negative effects of the consumption tax hike on consumer spending. "There are many factors that make future prospects murky, such as the sales tax raise," said one retail industry official. In contrast, others forecasted investments in infrastructure, as well as spending by an increasing number of foreign visitors, will prop up the economy until the 2020 Tokyo Games.

As for the current status of the economy, the largest group of respondents -- 88 companies or 72 percent -- said it is "recovering gradually." This proportion is lower than the 89 percent recorded in the previous survey, but many companies noted "improvements in corporate earnings and an increase in private-sector capital investments" as described by an official at major contractor Obayashi Corp.

As many as 34 corporations, or 28 percent, saw current economic conditions as having "leveled off" -- up 17 points from the last poll. Many respondents expressed concerns about the economic outlook, including an official at Toshiba Corp. who predicted the economy would "slow down due to the intensifying trade friction between the United States and China and the effect from the Chinese economy."

(Japanese original by Toru Yanagisawa and Shiho Fujibuchi, Business News Department)

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