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| Japan's economy shrinks after sales tax rise | |
| (about 4 hours later) | |
| Japan's economy contracted by an annualised 6.8% in the second quarter of the year, the biggest fall since 2011 when it was devastated by an earthquake and tsunami. | Japan's economy contracted by an annualised 6.8% in the second quarter of the year, the biggest fall since 2011 when it was devastated by an earthquake and tsunami. |
| The official gross domestic product (GDP) figure though was smaller than the 7.1% drop economists expected. | The official gross domestic product (GDP) figure though was smaller than the 7.1% drop economists expected. |
| The shrinkage was largely in response to a government sales tax, which held back consumer spending. | The shrinkage was largely in response to a government sales tax, which held back consumer spending. |
| Japan's sales tax rose from 5% to 8% in April. | Japan's sales tax rose from 5% to 8% in April. |
| On a quarterly basis, the economy contracted 1.7% in the second quarter after a 1.5% rise in the first three months. | On a quarterly basis, the economy contracted 1.7% in the second quarter after a 1.5% rise in the first three months. |
| Rebound ahead | Rebound ahead |
| Private consumption, which makes up 60% of economic activity, was 5% down on the previous quarter. | Private consumption, which makes up 60% of economic activity, was 5% down on the previous quarter. |
| The economy grew at an annualised rate of 6.1% in the first quarter of this year. | The economy grew at an annualised rate of 6.1% in the first quarter of this year. |
| Recent retail sales and factory output figures both indicated a negative impact from the sales tax rise. | Recent retail sales and factory output figures both indicated a negative impact from the sales tax rise. |
| Marcel Thieliant, Japan economist at Capital Economics, said a rebound was expected in the coming months: "The collapse in economic activity last quarter was largely a result of the higher sales tax, and we still believe that the recovery will resume in the second half of the year. | Marcel Thieliant, Japan economist at Capital Economics, said a rebound was expected in the coming months: "The collapse in economic activity last quarter was largely a result of the higher sales tax, and we still believe that the recovery will resume in the second half of the year. |
| "Consumers had brought forward spending ahead of April's increase in the consumption tax." | "Consumers had brought forward spending ahead of April's increase in the consumption tax." |
| The Japanese government appears confident that its economy, the world's third largest, will pick up the pace later in the year. | The Japanese government appears confident that its economy, the world's third largest, will pick up the pace later in the year. |
| In a statement issued after the GDP release, Economics Minister Akira Amari said: "Looking at monthly data during April-June, sales of electronics goods and those at department stores are picking up after falling sharply in April. | In a statement issued after the GDP release, Economics Minister Akira Amari said: "Looking at monthly data during April-June, sales of electronics goods and those at department stores are picking up after falling sharply in April. |
| "The job market is also improving steadily. Taking these into account, Japan's economy continues to recover moderately as a trend and the effect of the sales tax hike is subsiding." | "The job market is also improving steadily. Taking these into account, Japan's economy continues to recover moderately as a trend and the effect of the sales tax hike is subsiding." |