Tax rise deals blow to Japanese growth


A rise in VAT has delivered the biggest blow to Japan’s economy since the tsunami of March 2011, figures for April to June showed yesterday.

Shoppers in the world’s third-biggest economy had rushed to spend in the first quarter of the year to avoid the sales tax rise, brought in by Shinzo Abe, the Prime Minister, to tackle the nation’s huge debt burden.

As a result Japan’s GDP shrank at an annual pace of 6.8 per cent in the second quarter, falling 1.7 per cent between April and June – only just short of the 6.9 per cent collapse in the first three months of 2011.

But Mr Abe is hoping to shake Japan out of its deflation trap with a money-printing programme to drive down the yen and boost exports. 

Takuji Aida, an analyst at Société Générale, said: “We see reasons to be cheerful about growth for the third quarter.”