Japan's economy shrinks more than initial estimates

Japan's economy contracted by 7.1% in the three months to June, more than initial estimates, and revised from 6.8% reported in August. The BBC writes:

Most forecasts were for the economy to shrink by about 7%. The contraction during the second quarter has been widely attributed to a hike in the nation's sales tax, which rose from 5% to 8% in April.

The official gross domestic product (GDP) figure of 7.1% is an annualised number. In quarterly terms, Japan's economy, which is world's third-largest, shrank by 1.8% in the three months to June compared to the quarter ending in March when it grew by 1.5%.

Private consumption makes up some 60% of Japan's economic activity. The nation's consumers were largely seen spending more in the first quarter rather than the second, however, in an attempt to beat the sales tax hike introduced in April.

And that activity is what economists say negatively impacted growth in the second quarter.

A raft of official data released at the end of last month by Japan's government showed that households had spent less and that factory output stayed flat in July.