Japan GDP growth collapses amid sales tax shock

Japan's economy suffered its worst contraction since 2011 in the second quarter as the threat of higher tax payments put consumers off major purchases.

Japan GDP growth collapses amid sales tax shock 140812212050-japan-gdp-2-620xa

Japan GDP growth collapses amid sales tax shock 140812212050-japan-gdp-2-620xa

Gross domestic product shrunk by an annualized 6.8% in the three months ended June, Japan's Cabinet Office said Wednesday. The result was actually better than the 7% contraction expected by economists.

On a quarterly basis, Japan's GDP dropped by 1.7% as business and housing investment suffered.

The performance is the second half of a boom and bust cycle resulting from a planned sales tax hike that drastically changed consumer spending patterns.

Japan's consumption tax was increased to 8% in April in a bid to improve the country's fiscal position. If needed, the government has the option to implement an additional increase to 10% by 2015.

Earlier in the year, consumers responded in a big way -- and all the extra shopping contributed to the strong first quarter numbers. But now that the sugar rush is over, economists had expected Japan's growth rate to return to Earth in the second quarter.

http://money.cnn.com/2014/08/12/news/economy/japan-gdp/
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Japan GDP growth collapses amid sales tax shock

Japan GDP growth collapses amid sales tax shock

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