Japanese economy posts drastic contraction of 7.1pc
Tetsushi Kajimoto
Japan's economy shrank an annualised 7.1pc between April and June from the previous quarter, worse than a preliminary estimate, and adding to doubts over whether the central bank can achieve its target of 2pc inflation early next year.
The contraction was the biggest since the first quarter of 2009, when the global financial crisis hit Japan's exports and factory output, and some analysts now expect the economy to barely grow in the current fiscal year.
The weak performance following a sales tax hike in April will keep the Bank of Japan and Prime Minister Shinzo Abe's government under pressure to expand fiscal and monetary stimulus in order to lead the economy out of a long deflationary phase.
'The BOJ will ease policy in April because inflation will be too low to meet its target,' said Takuji Aida at Societe Generale. The fall was largely due to a bigger than expected fall in capital expenditure and a decline in consumer spending due to a VAT increase.
Irish Independent
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