The steep contraction of Japan's economy over the April-June period following sharp growth in the previous quarter — before the consumption tax hike — may have been within the range of expectations. But policymakers should not take a strong rebound in the July-September period for granted as the weakness in consumer spending comes amid a net decline in people's disposable income due to the tax hike and rising prices induced by the weak yen.
The nation's April-June gross domestic product fell an annualized 6.8 percent in real terms from the previous quarter, when the GDP expanded 6.1 percent. The fall in the April-June period was the sharpest since the Japanese economy was hit by the March 2011 Great East Japan Earthquake.
Because GDP grew rapidly in the January-March period as consumers rushed to buy ahead of the 3 percentage point hike in the consumption tax rate in April, it was widely anticipated that the economy would shrink in the following quarter.