Japan’s GDP Shrinks Sales Tax Most Likely Delayed

Japan’s economy unexpectedly shrank for the second consecutive quarter, leaving the world’s third largest economy in technical recession.

Gross domestic product (GDP) fell at an annualised 1.6% from July to September, compared with forecasts of a 2.1% rise.

That followed a revised 7.3% contraction in the second quarter, which was the biggest fall since the March 2011 earthquake and tsunami.

Economists said the weak economic data could delay a sales tax rise.

Prime Minister Shinzo Abe is widely expected to call a snap election to seek a mandate to delay an increase in the sales tax to 10%, scheduled for 2015.

The tax increase was legislated by the previous government in 2012 to curb Japan’s huge public debt, which is the highest among developed nations.

April saw the first phase of the sales tax increase, from 5% to 8%, which hit growth in the second quarter and still appears to be having an impact on the economy.

The economy shrank 0.4% in the third quarter from the quarter previous.

The data also showed that growth in private consumption, which accounts for about 60% of the economy, was much weaker than expected.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza