Nikkei falls on weak GDP data, raises questions about sales tax hike

Source: Yahoo

The Nikkei fell to a six-week low last night as the Cabinet Office revealed the economy grew by a weaker than expected 0.6 per cent in the second quarter, down from 1.0 per cent the quarter before. Analysts had expected a slight drop to 0.9 per cent.

This means the full year GDP expectation is for 2.6 per cent growth, down from the expected 3.6 per cent growth the quarter before.

As Japanese public debt hits one quadrillion yen – more than double the size of its GDP – prime minister Shinzo Abe had been expecting to raise the sales tax from five per cent to eight per cent in April 2014 and ten per cent in October 2015. But these GDP figures will add fuel to the fires of critics who want to see it delayed.

Meanwhile, industrial production fell by an expected 3.1 per cent in June, down from the 1.9 per cent growth seen the month before. Year-on-year, industrial production fell 4.6 per cent.