Shock drop

By T.B.

IN 1997 a rise in the consumption (value-added) tax stopped an economic recovery in its tracks. Now another rise in the unpopular tax has again caused a recession in Japan. The data, published on November 17th, came as a shock to the government, even though prime minister Shinzo Abe and his close advisers had warned of weak growth. Preliminary figures showed that Japan’s real, annualised GDP shrank by 1.6% in the third quarter, after contracting by 7.3% in the April-June period immediately after the tax went up, from 5% to 8% (see chart).