The Japanese Q2 GDP data (final) is here: Japan – GDP (seasonally adjusted) for Q2, final: -1.8% q/q (vs. expected -1.8%)

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A couple of recaps from the Wall Street Journal (may be gated) and Reuters :

  • Japan’s economy contracted … showing that the economy suffered a bigger setback following the sales-tax increase in April
  • The second-quarter setback followed a revised 6.0% jump in the first quarter, as consumer purchases of big-ticket items such as homes, cars and TVs soared before the April 1 sales tax rise, then plummeted thereafter.
  • Sales of consumer durables remain weak more than five months after the first sales tax rise in 17 years
  • Private economists expect the economy to snap back to a recovery path in the third quarter, forecasting a 4.0% rebound on average, according to the Japan Center for Economic Research
  • But policy makers aren’t so nonchalant, as household spending has been much slower to recover than anticipated, raising question marks about the realization of private-sector-led self-sustaining economic growth soon
  • The sharp slowdown can have various policy repercussions. A weak economy would likely to push back any sustained exit from deflation … possibly forcing the Bank of Japan to consider additional monetary easing measures
  • It will also complicate the government’s efforts on fiscal reform by making it difficult to raise the sales tax rate further to 10% next year following April’s rise to 8% from 5%