Increased Shrinkage


Japan’s economy shrank more sharply in the second quarter than first estimated and the latest indicators suggest only a modest bounce back since then.

The world’s third-largest economy contracted at an annualized rate of 7.1 percent in the April-June quarter, according to updated government figures Monday. The initial estimate released earlier this month said the economy contracted 6.8 percent. Business investment fell more than twice as much as first estimated.

The economy’s contraction was expected after Japan increased its sales tax from 5 percent to 8 percent on April 1.


There’s no doubt that Japan’s sales tax increase was ill-timed, but when your “recovery” turns into a an alarming 7.1% rate of contraction, then I think what we have here is further evidence of my proposition that a country can’t spend its way to prosperity.

Apparently it can’t tax its way there, either — but you probably knew that already.


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