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Japan in recession

November 17, 2014

Japan has slipped into recession in the third quarter. The news came as a surprise to most analysts - they had forecast a GDP rise. They said the government should think twice about another sales tax hike.

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Shinzo Abe
Image: Reuters

Japan's economy unexpectedly slipped into recession in the third quarter as gross domestic product in the world's third-largest economy fell by an annualized 1.6 percent.

The drop in the July to September period followed a more pronounced dip of 7.3 percent in the previous quarter, caused not least by a 3-percent sales tax hike in April.

Analysts had expected third-quarter GDP to rebound by 2.1 percent, but consumption remained weak.

Snap elections ahead?

Prime Minister Shinzo Abe said Monday he would look at the data in detail and make up his mind whether to press ahead with a second increase in the sales tax to 10 percent in October of next year, up from 8 percent at present.

"This is absolutely no situation in which we should be debating an increase in the consumption tax," University of Shizuoka professor Etsuro Honda said in a statement, warning against seeing a further tax hike as the only way of curbing the nation's huge public debt, the highest among advanced countries.

Wages rise in Japan

Japanese media reported the Prime Minister could call an election for parliament's lower house to lock in his mandate while his ratings remain relatively robust.

hg/nz (Reuters, AFP)