Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and 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 French fund CEOs: 'Brexit is a lose-lose situation for all of us'

French fund CEOs: 'Brexit is a lose-lose situation for all of us'

'We'll all lose out - but London is an international city, Paris is not.' Leading French asset management CEOs tell us what they think Brexit will mean for the investment business.

Play Mark Barnett - part 2: why I'm not buying Lloyds

Mark Barnett - part 2: why I'm not buying Lloyds

In the second part of our exclusive video interview, Barnett explains why he has no intention of buying Lloyds, and where he sees the greatest income opportunities.

Play Wealth managers reveal the best investment ideas of the year

Wealth managers reveal the best investment ideas of the year

From robotics to impact investing, wealth managers share the best ideas they have heard this year.

Read More
Wealth Manager on Twitter