Japan`s economy dips into recession

  • 02:08 - 2014/11/19

Japan`s economy unexpectedly shrank for the second consecutive quarter, marking a technical recession in the world`s third largest economy.

Japan`s economy, recession, election, sales tax

Japan`s economy contracts for a second quarter in a row

Gross domestic product (GDP) fell at annualised 1.6% from July to September, compared to 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.

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

Sales tax delay

Economists says the weak economic data means that Prime Minister Shinzo Abe is likely to call an election to seek a mandate to delay an increase in sales tax, scheduled for 2015.

The tax increase was legislated by the previous government in 2012 to curb Japan`s huge public debt.

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

Recent economic indicators showing a sluggish economy had already put the next tax hike in question.

Election expected

Speculation had been growing that the Japanese prime minister would call an election next month to shore up support just two years after he took office.

Local media are now reporting that Mr Abe could announce an election as early as Tuesday to be held on 14 December.

In reaction to the negative economic data, the dollar went above 117 Japanese yen before settling at 116.46.

The benchmark Nikkei 225, meanwhile, is trading lower 1.5% at 17,229.26 points.

 

Source: VietNamNet

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