Japan's economy shrank an annualised 7.1 percent in April-June from the previous quarter, worse than a preliminary estimate, and adding to doubts over whether the central bank can achieve its target of 2 percent inflation early next year. The contraction was the biggest since January-March 2009, when the global financial crisis hit Japan's exports and factory output, and some analysts now expect the economy to barely grow in the current fiscal year to March 2015.
The weak performance following a sales tax hike in April will keep the Bank of Japan and Prime Minister Shinzo Abe's government under pressure to expand fiscal and monetary stimulus in order to lead the economy out of a long deflationary phase. "Growth this year will be less than what policymakers are expecting. The BoJ will ease policy in April because inflation will be too low to meet its target," said Takuji Aida, chief economist at Societe Generale Securities.