Japan needs an economic injection of as much as ¥3.5 trillion ($28 billion) to shore up consumption and stave off further economic contraction, said Etsuro Honda, an economic adviser to Prime Minister Shinzo Abe.
"Households feel their income has been reduced," Honda, 60, said in an interview Tuesday at the Prime Minister's office in Tokyo. "The negative legacy of the previous tax hike is waning, but increases in wages are lower than expected and prices of food and daily commodities are rising."
The world's third-biggest economy shrank an annualized 1.6 percent in the three months through June as households and businesses cut spending and exports tumbled. While the tailwind from the weaker yen and the Bank of Japan's unprecedented monetary stimulus have helped propel stocks to an eight-year high, consumer confidence has slumped.