Japan suffered its biggest economic contraction since the devastating March 2011 earthquake in the April-June quarter as a sales tax hike took a heavy toll on household spending, stoking fears that any rebound may be too modest to sustain a solid recovery.
While the soft data is unlikely to shake the Bank of Japan’s conviction that the economy can ride out the tax hike impact, it could add pressure on the bank for further monetary easing if weakness in exports and consumption is prolonged.
The world’s third-largest economy shrank an annualized 6.8 percent in the second quarter, less than a median market forecast for a 7.1 percent drop and following a 6.1 percent increase in January-March as consumers spent heavily to avoid the sales tax increase, Cabinet Office data showed on Wednesday.
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