- Takuji Aida, chief economist at Societe Generale Securities
While the majority of economists expected a substantial slowdown in the Japanese economy in the second quarter, contraction appeared to be even more severe than projected. Revised data showed that the world's third biggest economy shrank an annualized 7.1% in April-June period from the previous quarter, adding to concerns that damage from the April sales tax hike may have been greater than estimated. The revised contraction contrasted the initial estimate of 6.8% and was the biggest since January-March 2009, when the global financial crisis undermined Japan's export sector and factory production, keeping policymakers under pressure to expand fiscal and monetary stimulus in case the nation's economy is not able to recover from the disruption of the April tax hike. On a quarterly basis the economy contracted 1.8%, wider than an initial reading of 1.7%. The hit from the sales tax increase extended into the current quarter, with retail sales and household spending falling in July. The government signalled last week that it stands ready to boost stimulus to help weather a second stage of the levy scheduled for October 2015.
A separate report showed Japan's current account surplus narrowed 31% on year in July to 416.7 billion yen, according to Ministry of Finance, missing the median forecast of a 444.2 billion yen surplus.
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