BARTENDER Yoshiro Tsuneoka smiled with satisfaction between popping open bottles of champagne. It was midweek, 8 p.m., and business was good at the tiny bar in downtown Tokyo.

    Watching a bevy of young professionals quaffing sparkling wine, there was little sign that an increase in Japan’s sales tax in April caused anything more than a hiccup in the economy.

    “Sales have been doing well for a while now and we’ve noticed no change after the tax increase,” Tsuneoka said above the sound of clinking glasses. “We get a broad range of customers, and their spending hasn’t changed.”

    Japan needs people spending with confidence if a radical strategy adopted by Prime Minister Shinzo Abe is to succeed in breaking the economy free of two decades of deflation and sub-par growth.

    Government data covering the period after the tax was increased to 8 percent from 5 percent at the start of April has begun to trickle in. Household spending and retail sales in April dropped the most in three years.

    But policymakers need to wait until July or so for a fuller picture of the tax impact.

    For the time being, champagne sales and other untraditional measures may offer a good early read on consumption, which makes up 60 percent of the economy.

    A sharper downturn in spending could have big consequences, potentially prompting the Bank of Japan to increase its massive monetary stimulus and complicating Abe’s attempts to rein in the developed world’s biggest debt burden.

    Politicians painfully remember the deep recession that followed the last tax hike in 1997 — although that downturn coincided with the Asian financial crisis.

    If the economy re-gathers pace after absorbing the initial impact of the sales tax, it would allow Abe to focus on reforms to boost Japan’s long-term growth, and make it easier for him to decide later this year whether to go ahead with a planned second increase in the tax.

    Bank of Japan mandarins are known to keep tabs on informal indicators, like the price of a budget haircut or “gyudon” bowls of stewed beef on rice. How easily businesses can pass higher costs on to consumers is fundamental to the central bank’s drive to generate 2 percent inflation.

    Whereas people with a taste for champagne might not be representative of the average Japanese household, the IT startup employees and web designers drinking at Tsuneoka’s bar are not especially wealthy either.

    But they have a choice what to do with their money, and clearly prefer to keep on spending for the temporary pleasure given by the imported bubbly.

    Paying less than 1,000 yen (US$9.80) a glass, they are only drinking a mid-tier label, not the fancier stuff costing 20 to 70 percent more.

    Japan’s imports of champagne and other sparkling wine climbed 18.8 percent by volume in April from a year earlier, barely slowing from March’s 21.1 percent rise and extending a series of increases that began late last year.

    This is in line with brisk sales in what advertisers call the “petite luxury” market, where slapping a “premium” label on a product can help it fetch a higher price.

    (SD-Agencies)