New year begins with measures to discourage consumer spending

Sunday 02nd January, 07:51 AM JST

TOKYO —

The beginning of the new year marked some significant changes that economic analysts say will dampen consumer spending in Japan, most notably an eco-point subsidy cut and an end to tax breaks for certain families.

Consumer confidence in the country, already mired in the long-stagnant economy, is expected to be hit further after eligibility for the government’s eco-point program became limited on Saturday to only ‘‘five-star’’ energy-efficient home appliances.

Eco-points are now awarded for the purchase of top-tier energy-saving products designated under the country’s home appliance recycling system only for the purpose of replacing old appliances.

The latest step came a month after eco-points were cut by half due to concerns about funding shortages for the incentive program, which will expire at the end of March.

The slashing of eco-points led to a 40% drop on year in sales of flat-screen televisions at major retailers in the first half of December, according to research firm GfK Marketing Services Japan.

A number of analysts forecast sales declines of the same scale will continue although last-minute demand is expected to emerge prior to the expiration of the subsidy program.

Yusaku Yamagata, an analyst at GfK Marketing, described such a rush of buyers as a preempting of demand and said it is likely that home appliance sales will ‘‘decrease for two to three years’’ in reaction to the higher demand supported by the eco-point scheme.

Also denting consumer sentiment is the abolition this month of the dependent deduction for children up to the age of 15, adopted under the tax system reform for the current fiscal year through March to help fund child-rearing allowances.

Estimates by the Dai-ichi Life Research Institute say there will be a decrease of 76,000 yen in tax breaks or government support in 2011 from the previous year for a family of a salaried worker with an annual income of 8 million yen, a non-working spouse and a child attending an elementary school or junior high school.