Japan's GDP falls 1.6% on annual basis; tax hike delay certain

News Desk

The Yomiuri Shimbun

Publication Date : 18-11-2014

Japan's gross domestic product in the July-September period marked an unexpected negative growth of 1.6 per cent on an annual basis, the Cabinet Office said Monday.

According to a preliminary report announced by the Cabinet Office, the GDP dropped 0.4 per cent from the previous April-June period in price-adjusted real terms for the second straight quarterly decline.

Prime Minister Shinzo Abe believes it will be difficult to raise the consumption tax rate from 8 per cent to 10 per cent in October next year as planned. Abe is expected to delay the consumption tax hike by 18 months until April 2017 and dissolve the House of Representatives.

Abe will announce his decision to postpone the planned consumption tax hike and intention to dissolve the lower house at a press conference on Tuesday. December 14 is considered the most likely date for a general election, with official campaigning kicking off on December 2.

The annualised GDP figure in the July-September period was substantially below the average forecast of 2.5 per cent growth by private research institutes, clearly illustrating the economic stagnation after the consumption tax rate was raised from 5 per cent to 8 per cent in April.

Personal consumption, which accounts for about 60 per cent of the nations GDP, increased 0.4 per cent from the previous quarter. However, its recovery from the April-June period, which marked a 5 per cent decline a reaction to a last-minute surge in demand prior to the tax hike in the previous quarter was slow.

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Japan's GDP falls 1.6% on annual basis; tax hike delay certain