Japan’s economy shrank for the second consecutive quarter, marking a technical recession and setting the stage for Prime Minister Shinzo Abe to delay an unpopular sales tax hike.
Data released Monday showed gross domestic product (GDP) of the world’s third largest economy fell 1.6 percent on an annualized basis in the three months to September, after contracting 7.3 percent in the preceding quarter as higher sales tax crimped consumer spending.
The economy had been forecast to rebound by 2.1 percent in the third quarter, but consumption — as well as exports — remained weak, Reuters reported.
The data could prompt Abe to rethink plans for a further hike in the sales tax rate to 10 percent from October next year, and also lays the ground for a snap election half-way through his term.
An economic adviser to the prime minister termed the economic slide “shocking,” and urged the government to consider steps to support the economy.
“This is absolutely not a situation in which we should be debating an increase in the consumption tax,” Etsuro Honda, a University of Shizuoka professor and a prominent outside architect of Abe’s reflationary policies, told Reuters.
The yen slipped after the poor GDP data, with the dollar briefly pushing to a seven-year high above 117 yen.
Equities, meanwhile, got pummeled, with Tokyo’s benchmark Nikkei index sliding as much as 2.6 percent.
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