Japan’s Contraction Attributed to Sales Tax

Japan’s economy contracted by 7.1% in the three months to June, more than initial estimates, and revised from 6.8% reported in August.  Most forecasts were for the economy to shrink by about 7%.

The contraction during the second quarter has been widely attributed to a hike in the nation’s sales tax, which rose from 5% to 8% in April.  The official gross domestic product (GDP) figure of 7.1% is an annualised number.

In quarterly terms, the Japan’s economy, which is world’s third-largest economy, shrank by 1.8% in the three months to June compared to the quarter ending in March when it grew by 1.5%.


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