Japan's economy shrinks
Japan's economy shrank 1.8% in the April-to-June period, worse than
forecast and raising more questions about the government's economic
policy.
The official data confirmed that the world's third largest economy
suffered its sharpest quarterly contraction since the 2011 earthquake
disaster.
On an annualised basis it would mean gross domestic product (GDP)
fell 7.1%.
The fall was blamed in part on a consumer sales tax introduced in
April, with another rise planned for 2015.
The release of Monday's revised official data follows publication of
initial GDP estimates that put the second quarter contraction at 1.7%,
with the annualised rate at 6.8%. In the first quarter of 2014, the
economy grew by 1.5%.
The single biggest factor behind the contraction in the second
quarter is thought to be a rise in the nation's sales tax in April, to
8% from 5%.
There are now calls for Prime Minister Shinzo Abe to delay a further
rise planned for next year, while the Central Bank has faced fresh
demands to expand its stimulus program.
Private consumption makes up some 60% of Japan's economic activity.
Retail spending figures have showed that the country's consumers boosted
spending the first quarter in an attempt to beat the sales tax hike in
April.
And that activity is what economists say negatively impacted growth
in the second quarter.
A raft of official data released at the end of last month by Japan's
government showed that households had spent less and that factory output
stayed flat in July.
Retail sales in July showed some small hope, rising by 0.5% from a
year earlier, after a fall of 0.6% in June.
But economists said the present economic landscape should encourage
the government to introduce even more reforms.
Prime Minister Shinzo Abe's position on raising the sales tax to 10%
is "utterly neutral", said Japan's Economy Minister Akira Amari
At the beginning of this month, Abe introduced a government
re-shuffle, which many have said signals his determination to get the
economy back on track by the end of the year.
Abe is expected to make a decision in December about a second hike to
the sales tax, which would see it move to 10% in October next year.
Japan's Economy Minister Akira Amari said on Friday that the nation
was ready to introduce a stimulus package that would buffer the impact
of another sales tax hike if it was introduced.
He said the prime minister's position was "utterly neutral" on a
further sales tax rise.
- BBC |