Japan economy logs worst drop in over 5 years

Agence France-Presse

Posted at Feb 17 2020 10:15 AM

Pedestrians make their way in a business district in Tokyo, Japan May 16, 2018. Kim Kyung-Hoon, Reuters/File Photo

TOKYO - Japan's economy suffered its worst quarterly contraction in more than 5 years at the end of 2019 after a tax hike and typhoons, according to official data on Monday.

The nation's gross domestic product in the three months to December shrank 1.6 percent from the previous quarter, before the novel coronavirus outbreak in China hit Japan.

The drop was much worse than the one-percent contraction economists had expected.

The disappointing data snapped 4 quarters of expansion and was the biggest contraction since the second quarter of 2014 when the economy shrank 1.9 percent after the first sales tax hike in 17 years was introduced.

The tax hike appeared to have taken its toll in the fourth quarter of 2019, as personal consumption fell 2.9 percent after the government raised the sales tax in October from 8 percent to 10 percent.

Business expenditure on factories and equipment decreased 3.7 percent despite investment getting a boost from cashless-payment systems that allow consumers to alleviate the consumption tax hike.

Economists are now carefully watching what impact the new virus outbreak will have on the world's third-largest economy, as it hit Japanese companies' manufacturing activities and tourism.