Sep 09, 2014

    Japan's economy takes bigger hit than expected


    JAPAN'S economy shrank more than estimated from April to June, revised data showed yesterday, piling pressure on the government to delay another sales-tax hike, while the central bank faces calls to expand its stimulus.

    The figures will come as a blow to Prime Minister Shinzo Abe, as his programme aimed at rejuvenating growth struggles to gain traction.

    Second-quarter gross domestic product (GDP) shrivelled 1.8 per cent from the previous three months, worse than the previously estimated fall of 1.7 per cent, the Cabinet Office said.

    The latest statistics confirmed that the world's third-largest economy had suffered its steepest quarterly drop since the 2011 quake and tsunami disaster.

    On an annualised basis - if the performance was replicated over a 12-month period - GDP contracted 7.1 per cent, compared with 6.8 per cent in the preliminary estimate. That makes it the worst performance since early 2009, at the height of the global financial crisis.

    The disappointing result was largely caused by the negative impact of April's sales-tax hike, the first in 17 years, which was introduced to lift revenue and reduce the country's massive national debt.

    Yesterday's weak figures could force Tokyo to re-assess a second tax increase planned for next year.

    "Expectations will likely strengthen for further monetary easing by the Bank of Japan and more spending by the government," said Junichi Makino, SMBC Nikko Securities' chief economist.