Wealth Manager - the site for professional investment managers

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

Japanese economic growth collapses in Q2 as sales tax bites

Japanese economic growth collapses in Q2 as sales tax bites

Japan's economy in the second quarter shrank by the highest amount since the earthquake and tsunami of March 2011 as the recently introduced sales tax hammered household spending.

The country's GDP contracted by 6.8% in Q2 -a marked contrast to the 6.1% rise seen in Q1 - which has been attributed to the sales rush before the tax came in and subsequent lull when it became law in April. Quarter-on-quarter, it represented a 1.7% fall.

Although the numbers sound severe, economists had predicted Japanese GDP would contract by 7.1% with the impact of the sales tax widely flagged.

The key decision for the Japanese government now will be whether or not to press ahead with the planned second rise in consumption tax in October.

'The collapse in economic activity last quarter was largely a result of the higher sales tax and we still believe that the recovery will resume in the second half of the year,' said Capital Economics' Marcel Thiellant.

While he described the fall in non-residential housing investment, which unlike residential housing is not subject to the new consumption tax, as 'ominous', Thiellant said the bright spot in the Japanese data release was the fact that 'net trade added to growth for the first time since the launch of Abenomics'. However, the caveat to this apparent bright spot is that this was largely down to imports flagging due to reduced consumption, which is unlikely to win over the Japan bears.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Boutique tapes: my business will never be sold

Boutique tapes: my business will never be sold

In the final part of our four part series we discuss consolidation and whether it's getting tougher for boutiques to survive.

Play Boutique tapes: are top managers better off at small firms?

Boutique tapes: are top managers better off at small firms?

In episode three of our series, boutique bosses discuss whether the best fund managers are more likely to thrive at smaller firms.

Play Boutique tapes: if you want a Ferrari, you have to pay for it

Boutique tapes: if you want a Ferrari, you have to pay for it

In the second part of our four-part series, boutique bosses are asked how they can justify the fees charged by active managers.

Read More
Your Business: Cover Star Club

Profile: how this boutique beat the big guns of wealth

Profile: how this boutique beat the big guns of wealth

This small west country offshoot of a local IFA scooped a 2018 Citywire award from beneath the noses of the national challengers

Wealth Manager on Twitter