TOKYO — It was a race against time.

This story first appeared in the April 3, 2014 issue of WWD. Subscribe Today.

Japanese department store retailers saw their March comps surge at a double-digit pace as consumers rushed to make purchases before a consumption tax hike went into effect Tuesday.

Japan’s sales tax increased from 5 to 8 percent on April 1. Economists and observers are questioning whether the tax hike — the first for the country since 1997 — will derail Japan’s economic recovery and dent a recent rebound in luxury goods. But for March at least, department stores enjoyed brisk business as consumers stocked up on apparel, jewelry and other items. On the lower end of the market, Fast Retailing Co. Ltd.’s Uniqlo chain saw almost no impact, posting nearly flat comps for the month.

Isetan Mitsukoshi Holdings Ltd. said that sales at its nine main stores in Japan increased 24.2 percent over the same month last year. The retailer has seen sales increase each of the past 12 months, but March was by far the largest jump. Some individual stores, such as the Ginza and Nihonbashi branches of Mitsukoshi, both located in Tokyo, had sales increases of more than 30 percent last month.

Takashimaya also reported large increases in monthly sales for March, saying that sales at its 18 department stores in Japan were up 32.1 percent. Its store in Tokyo’s Nihonbashi district had the biggest jump, at 41 percent.

“Our March sales increased drastically on the previous year, due to an improvement in business sentiment and a last-minute rush before the consumption tax hike,” Takashimaya said. “We saw large growth in sales of big-ticket items, as well as increases in living products and fashion items such as clothing and accessories.”

J. Front Retailing Co. Ltd. said that sales at its 18 Daimaru and Matsuzakaya department stores in Japan were up 34.9 percent in March, with some stores reporting sales growth of well over 50 percent.

“In preparation for the consumption tax increase, we saw large sales growth. Sales of watches and jewelry were about triple the figure from the same month last year, luxury brand goods and cosmetics increased by about 70 percent, and toward the end of the month we saw an acceleration in sales of underwear and preserved food products. Every product category showed a favorable change,” said the J. Front release.

H2O Retailing Corp., which operates the Hankyu and Hanshin chains of department stores, said March sales at its department stores in Japan grew by 26.5 percent. The company’s department store sales have increased each month for more than a year, but the March jump was the largest so far.

Fast Retailing said Wednesday that Uniqlo’s same-store sales in Japan inched up just 0.6 percent in March. Tadashi Yanai, Fast Retailing’s president and chief operating officer, has said in the past that he didn’t expect the tax increase to greatly impact the retailer’s sales, due to the fact that its prices are very low from the outset.

Meanwhile, economists are considering the longer-term implications of the tax hike. Nomura bank economists Shuichi Obata and Tomo Kinoshita cited “growing concerns” about the Japanese economy in a note Tuesday.

“The Japanese economy has recovered strongly to date, supported by the government’s stimulus measures and a surge in demand ahead of the hike to consumption tax. However, the March [Bank of Japan Tankan survey of businesses] shows companies are increasingly concerned about the outlook for the economy after the tax hike,” Obata and Kinoshita wrote.

Analyzing results from the Tankan, the Nomura economists estimated that Japan’s annualized real gross domestic product for the second quarter will contract by about 4.1 percent.

Taking a longer-term view, Fitch Ratings said Monday it thinks “the direct drag on growth from the tax hike will be limited,” citing evidence from the aftermath of the 1997 tax increase.

“Consumer confidence picked up again in 2Q and 3Q 1997 before declining again as other factors came to bear — such as the Asian financial crisis…and a slowdown in wage growth following a decline in corporate profitability. Fitch does not expect the consumption tax hike to derail Japan’s recovery in 2014, based on a reading of this evidence,” Andrew Colquhoun and Art Woo of Fitch Ratings’ Sovereigns Group wrote in a report.

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