The decline was certainly expected but not of this magnitude. Japan has indeed known the sharpest contraction in economic activity since the earthquake and tsunami in March 2011, says Reuters. The Japanese gross domestic product (GDP) fell by 1.7% between April and June compared to the first quarter, when he had to steady progress since late 2012, with the exception of the fourth quarter of 2013 which had stagnated
VAT plunged spending
At issue. increasing Japanese consumption tax, equivalent to the French VAT from 5% to 8 % on April 1. This increase of three points sealed household consumption with a consequent fall of 6.8% annualized gross domestic product (GDP) in the April-June quarter, which totally wiped out the 6.1% growth recorded the first three months of the year.
In detail, between April and June, the household spending accordingly plunged 5.2%. Businesses reduced at the same time their 2.5%. Real estate has also been greatly affected (-10.3%).
The turn of Abenomics
As a result, imports have experienced a slowdown (-5.6 %), while exports are still unable to recover (-0.4%).
The government has in turn decreased their investments (-0.5%), but a new package of support (€ 40 billion) is expected to take over from exceptional stimulus budgets voted early 2013 shortly after the arrival in power of Shinzo Abe (75 billion euros). These budgetary largesse are one of three “arrows” from “Abenomics” alongside monetary easing by the Bank of Japan (BoJ) and structural reforms.
Optimism of Japanese government
However, the government is optimistic, as the BoJ reluctant to move at any time for additional support. “Our vision has not changed,” , said Wednesday the Minister of Economic revitalization, Akira Amari, quoted by Jiji agency. He said the tax effect, in line with expectations, fades gradually.
He reiterated that the decision on a possible further increase in “Japanese tax” would be taken by year’s end , in terms of indicators for the third quarter.
Scheduled in October 2015 and promoted by the International Monetary Fund (IMF), the passage at a rate of 10% is to perpetuate the system of social protection and to curb the growth of the colossal public debt of the country, which is already 250% of gross domestic product (GDP) of Japan, an unparalleled level among developed countries.
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