Japan's economy unexpectedly shrank at an annualized pace of 1.6 percent in the July-September period, down for the second straight quarter, due to a slump in exports and personal consumption, the government said Monday.
The contraction followed a revised 7.3 percent annualized drop in the previous quarter, according to preliminary data released by the Cabinet Office.
On a quarterly basis, the world's third-biggest economy's gross domestic product (GDP) declined 0.4 percent in the three months ended September 30, following a revised 1.9 percent contraction in the April-June period. Personal consumption, which accounts for about 60 percent of Japan's GDP, only grew 0.4 percent from the previous three months, as the impact of the sales tax hike in April and cooler weather in the summer have made people reluctant to spend money. Corporate capital spending, another key pillar of domestic demand, slid 0.2 percent. Exports grew 1.3 percent from the previous quarter.
"The GDP data indicates the April tax hike had a bigger impact on the Japanese economy than we expected as the people have not yet cleared away deflationary mindset," Economy and Fiscal Policy Minister Akira Amari told a press conference.
The government raised sales tax from from five percent to eight percent on April 1. Prime Minister Shinzo Abe has said he will decide by the end of this year whether to further increase the sales tax to 10 percent in October 2015 after assessing July-September GDP data.
Japanese media said Abe is expected to announce his decision to postpone the second increase and call a snap general election on Tuesday.
The GDP deflator, a gauge of overall price movements, was up 2.1 percent from the previous quarter. Nominal GDP, which is before adjusting for inflation, fell 0.8 percent on quarter, or an annualized 3.0 percent. GDP is the total value of goods and services produced domestically. Real GDP is adjusted for price and seasonal variations.