Fingers crossed

THE government of Shinzo Abe, Japan’s prime minister, has put a brave face on the news that GDP shrank by 1.7% in the second quarter of this year. Akira Amari, the economy minister, blamed the fall, of an annualised 6.8%—the steepest since the earthquake and tsunami that pummelled Japan in 2011—on the decision to raise the consumption tax from 5% to 8% in April and said the economy will rebound. Not everyone is so sanguine.

Worryingly, private consumption plunged by 5% from the previous quarter. Besides having stocked up ahead of the tax rise, households are feeling squeezed by higher prices in the shops. Mr Abe’s most vaunted achievement has been to reverse years of stubborn deflation, a strategy that depends on wages rising. Yet in real terms they fell by 3.2% year-on-year in the second quarter, the steepest drop in 18 quarters, according to Barclays Research in Tokyo.