Store clerks were busily changing price tags across Japan on Oct. 1 as the nation's first consumption tax hike in more than five years took effect, raising the rate from 8 percent to 10 percent.

However, the tax rate for food and newspaper subscriptions was kept at 8 percent, marking the first time the government has introduced a reduced tax rate for certain items.

The government also introduced a point return system for cashless payments in a bid to mitigate the negative effects on the economy, as consumers tighten their purse strings. As the point return system is complicated, it is feared that it could cause confusion among shoppers.

The increase marked the first increase in the consumption tax rate since April 2014. It was also the third rate hike since the consumption tax was introduced in April 1989 at a rate of 3 percent.

The consumption tax rate hike to 8 percent and further to 10 percent was decided in 2012 in an agreement between the then ruling Democratic Party of Japan and then opposition Liberal Democratic Party and Komeito.

The current Abe administration raised the tax rate from 5 percent to 8 percent as scheduled in April 2014. However, it twice postponed the rate hike to 10 percent, which was originally to take effect in October 2015.

Prime Minister Shinzo Abe decided on the postponements as he believed that the rate hike to 8 percent had hurt the Japanese economy.

The gross domestic product (GDP) in fiscal 2014 decreased by 0.4 percent from the previous year.

With the tax rate hike to 10 percent on Oct. 1, the Abe administration became the first administration to have twice raised the consumption tax rate.

UNCHANGED RATE ON SELECTED ITEMS

In the latest rate hike, however, the government kept the consumption tax rate unchanged on some items to soften the impact on low-income earners. The tax rates of food and beverages, excluding alcohol and meals served at restaurants, and newspapers bought through subscriptions remained at 8 percent.

Other measures, including the point return system for cashless transactions at small and midsize retailers and premium-attached merchandise coupons, were also introduced to bolster the Japanese economy.

The government initially planned to use most of the increased revenue from the rate hike to repay its debts. However, it later changed the plan, and now will use part of the additional tax receipts to make education for preschoolers free of charge.

The prospects of the Japanese economy are unclear mainly due to intensifying trade friction between the United States and China.

The government plans to take additional economic measures if the possibility of recession becomes stronger.

CUSTOMERS BUYING IN PRE-TAX HIKE FRENZY

On Sept. 30, the Nakameguro-Honten outlet of the Don Quijote discount store chain was packed with customers wanting to buy items before the consumption tax rate hike took effect.

To attract such customers, the operator of Don Quijote stores offered an “8-percent discount” campaign until Sept. 30 at its 380 outlets, including not only Don Quijote stores but also other group outlets.

In the Nakameguro-Honten outlet, displays of daily necessities and alcohol were stacked like mountains.

A homemaker in her 50s, who bought such products as detergents and cosmetics worth 12,000 yen ($111) in total, said that she will store them at home.

“I was caught up in the buying mood before the consumption tax increase took effect, and I purchased them against my will,” she said.

At major convenience store chain Lawson Inc., work to change the prices to reflect the consumption tax hike started in the afternoon of Sept. 30 in most of its outlets.

A price tag based on the 8 percent tax rate had been pasted over a price tag showing the 10 percent tax rate. Therefore, store clerks only had to peel off the top price tag to reveal the new price underneath.

From midnight, the 10 percent tax rate took effect. Along with it, a 2 percent reward points program for cashless payments also began.

Company employee Daichi Tsujino, 23, who bought an energy drink with electronic money, received points equivalent to 8 yen.

“As I often shop at convenience stores, the point return program is a big thing for me,” he said.