Japan Will Increase Its Consumption Tax To 10%, And UNIQLO And Muji Will Increase Investment In China.

The flagship store of UNIQLO Xin Qiao Bridge

October 15, 2018: Japanese Prime Minister Shinzo Abe, Abe Shinzo, announced on Monday that he intends to raise the Japanese consumption tax from 8% to 10% in October 1st next year, resulting in a 225 setback in the Nikkei, and more than half of the heavyweights such as fast selling (9983.T) and Softbank (9984.T).

Since 1997, the Japanese government has begun to raise revenue by raising the consumption tax. In April, the consumption tax rose from 3% to 5%. In April 2014, it increased to 8% again, and was raised again to 10%. It was originally scheduled to be implemented in 2015. However, due to the weak economy and the retail market, it was postponed at the very end.

Although the market was finally expected to raise the consumption tax to 10%, the Japanese stock market crash on Monday showed that the impact of the consumption tax on the current Japanese economy is very worrying for investors.

The increase in consumption tax will inevitably inhibit consumption. For developed economies, consumption is the main source of economic growth. Meanwhile, Chinese tourists who have aggressively invaded Japan's tourism and consumption in recent years may also be affected by this effect and weaken consumption.

However, the Andouble administration said it would consider allowing small retailers to impose a 2% return on consumers to offset the increase in the consumption tax.

With regard to the increase in consumption tax and the aging problem, the main retailers in Japan have been prepared to actively explore the surrounding Southeast Asian market, especially the huge consumer market.

It has become the most important market for Uniqlo, MUJI, UNIQLO and Muji two.

At the beginning of the month, the annual report released by Fast Retailing Co. Ltd. (9983.T) fast marketing group of UNIQLO parent company showed that, at the end of August, the overseas business of UNIQLO surpassed the local market for the first time.

During the reporting period,

Revenue of 896 billion 300 million yen, an increase of 26.6% over the same period, while Japan's UNIQLO revenue increased by 6.7% to 864 billion 700 million yen.

Besides, with the expansion of stores and the growth of same store sales, overseas UNIQLO's operating profit margin has been significantly improved, with a 13.5% operating profit rate.

13.9% only 60 basis points, while overseas UNIQLO's annual operating profit is 118 billion 800 million yen, which is basically equal to 119 billion yen of Japanese UNIQLO, beginning in the two quarter of 2018 fiscal year 3-5, and overseas UNIQLO operating profit began to surpass the Japanese market.

Although Muji has recorded the same store sales decline for the first time in the Chinese market in the past quarter, it benefited from a net increase of 25 stores. In the two quarter, the sale of Muji China sales in renminbi was still 10.4%, only a sharp slowdown compared with the first quarter of 14.8%.

By the end of August, there were 235 stores in China, compared with 210 in the same period last year. In the first half of this year, the brand added 6 stores in China, including 8 new outlets and 2 outlets.

At the end of the fiscal year, there were 264 stores in China, and 35 new outlets opened in the second half.

Matsuzaki Kyo, the parent company of Ryohin Keikaku Co. Ltd. (7453.T), President of Satoru Ltd. Matsuzaki, said earlier that Muji would continue to invest in China as the most important market because of the aging of the Japanese market and the saturation of stores.

In addition to the strong attraction of the Chinese market for Japanese brands, Sino Japanese relations may enter a new historical stage under the shadow of Sino US trade war. At the end of this month, Andouble will start his visit to China. This visit to China is the first visit to China after 7 years.

As soon as China and Japan enter the honeymoon period, there will be more opportunities for tourism, consumption and tariffs to come up with more exchange promotion policies, which will undoubtedly open up new opportunities for Japanese brands.