TOKYO — Japan, the world's third largest economy, slipped into recession after the nation's gross domestic product fell for the second consecutive quarter this year, according to data released Monday by Japan's Cabinet Office. Last month, economists projected 2 percent growth for the third quarter. But official government figures released Monday showed an even bleaker 1.6 percent annualized contraction, due to continued sluggish consumer consumption triggered by a 3 percent sales tax hike — the first phase of a 5% increase implemented back in April.
"The impact of raising the sales tax despite not being able to wipe out the deflationary mindset was big," said Akira Amari, Minister for National Strategy and Economic Policy, said in a briefing carried on national television news. Prime Minister Shinzo Abe's ruling Liberal Democratic Party and the main opposition Democrats had agreed to decide this month whether to introduce the second stage of the tax hike next fall. That plan now could be postponed given the latest statistics.
There have been strong indications from the ruling party that Prime Minister Abe will call for snap elections next month if he decides to postpone the sales-tax hike and seek public approval to press ahead with his economic strategies despite the setback with the planned tax increase. The Prime Minister returns from Australia later Monday and is expected to make an announcement as early as Tuesday.