Japan, World’s Third Largest Economy, Contracts
In the third quarter of 2014 the Japanese economy lost 1.8 percent of its GDP. This exceeds the growth of 1.5 percent in Q1 of 2014. In other words, for the first half of 2014, on a net basis the overall Japanese economy lost about half a percent of its annual GDP.
Some commentators have blamed the decline on specific public policy measures, such as a large increase in the national sales tax in April, which was implemented to cope with Tokyo’s staggering fiscal deficit and public sector debt. However, it seems more likely that the tax increase sparked the growth in GDP in Q1 as shoppers sought to beat the tax increase, rather than depressing consumer demand in Q2.
On balance, the worse than expected Japanese economic data confirms that Japan remains mired in economic stagnation, despite a multiplicity of stimulus measures enacted by various Japanese governments, and most recently by current Prime Minister Shinzo Abe, in addition to loose monetary policies adopted by the Bank of Japan. In the meantime, tensions are rising between Japan and its major trading partner, China. That will only worsen the plight of the Japanese economy.
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