Japan's economy contracted at a larger than earlier estimated annual rate of 7.1 per cent in April-June, the government said Monday.
Revised data showed business investment fell more than twice as much as estimated before, or 5.1 per cent, while private residential spending sank 10.4 per cent. The earlier estimate showed the economy contracting 6.8 per cent.
The recovery of the world's third-largest economy has slowed following an increase in the sales tax to 8 per cent from 5 per cent on April 1.
The economy grew at a seasonally adjusted annual rate of 6 per cent in January-March. In quarterly terms, the economy contracted 1.8 per cent in April-June from the previous quarter.
Prime Minister Shinzo Abe has championed an aggressive stimulus program aimed at ending chronic deflation that has discouraged corporate investment, dragging on growth. But a sustainable recovery will require strong corporate and private spending, since exports and public spending appear are doing little to lift growth.
Business activity surged early in the year as consumers and businesses stepped up purchases to avoid paying more tax, and economists forecast a rebound in coming months, though signs suggest it will be modest.
"Industrial production was still 2 per cent below the second quarter average in July, and we have yet to see a turnaround in capital spending," Marcel Thieliant of Capital Economics said in a commentary. He noted that a recovery in retail sales should help boost growth, despite the sharp drop in residential spending following the tax hike.
Abe faces a tough decision over whether to go ahead with a pledge to raise the sales tax by another 2 percentage points, to 10 per cent in 2015. The tax hikes are needed to counter ballooning public debt, which now is more than twice the size of the economy.
This content appears as provided to The Globe by the originating wire service. It has not been edited by Globe staff.