Japan's GDP (gross domestic product) shrank an annualized 6.8% in the second quarter (Q2 2014), plunging at its quickest pace since the March 2011 earthquake-tsunami disaster and hurt by the 3-percentage-point consumption tax hike to 8% from April 1.
The pace of the economic downturn almost matched the 6.9% fall in the
January-March quarter of 2011 due to the disaster and was much faster than the
3.5% decline after the last consumption tax hike in April 1997 when the tax rate
was increased by 2 points to 5%.
Personal spending dropped 5.0% following a 2.0%
increase in Q1 2014 while in the January-March period of 1997, personal spending
rose 2.1%, but fell 3.5% in the following quarter.
Exports grew 4.2% on the year in April-June of 1997, supporting the economy in place of shrinking consumption. "Production shifts to overseas are well underway," said Amari, indicating that the export decline this time is a long-term structural trend.
The Nikkei newspaper says economists doubt the Japanese economy will slip into a downward spiral. According to the Japan Center for Economic Research, 42 economists it surveyed forecast GDP will grow 4.08% in the July-September period.
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