Japan’s economy plunged into the negative territory in Q2 2015 amid a slump in export sales, lower consumer spending, and investment cut. According to the flash estimate of the Cabinet Office, Japan’s economy shrank at an annualized pace of 1.6% in April-June despite a notable pickup of 4.5% in the previous quarter. Nevertheless, the weak GDP print in Q2 is better than a median market forecast of a 1.9% fall.
Private consumption, which makes up roughly 60% of economic activity, fell 0.8% from Q1 for the first time in the recent 12 months. Export sales tumbled 4.4%, posting the biggest slump in four years. Companies cut their investments by 0.1%.
“There is no engine of growth for Japan right now, either in or outside the country,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co.
The Bank of Japan could introduce an extra stimulus package. However, the decision will depend on an economic rebound in the next quarter. Currently, Japan’s regulator is pursuing the same QE program boosting the monetary base by 8 trillion yen ($640 billion) a year.
