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Prime Minister Shinzo Abe's signature policy, Abenomics, was supposed to solve Japan's problems of deflation and decline. Billions of dollars' worth of stimulus later, the economy is sliding into contraction. (Nikkei photo illustration/Source photo by Aflo)
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MITSURU OBE and ERI SUGIURA, Nikkei staff writers | Japan

TOKYO -- Outside Masahisa Noda's secondhand shop in Tokyo's Asakusa district are racks of bargain items, on sale at 30% off; on the glass door is a sign offering a 5% rebate for cashless payments. Inside, surrounded by kimonos and obis stacked neatly on shelves, Noda is gloomy about the future. A hike in the consumption tax last fall hit his sales hard, and he sees little prospect of a recovery.

"People buy a kimono as a small luxury. It's not an essential item," he said. "A tax increase of just 2% can still make people postpone purchases. Sales started slowing even before the higher tax kicked in. People had already become defensive. They tried to avoid unnecessary spending."

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