November 16, 2014 / 11:58 PM / 5 years ago

Japan third-quarter GDP unexpectedly shrinks, Abe seen delaying tax hike

People are reflected on an electronic board displaying a graph showing the movement of Nikkei share average outside a brokerage in Tokyo November 7, 2012. REUTERS/Toru Hanai

TOKYO (Reuters) - Japan’s economy unexpectedly shrank an annualised 1.6 percent in July-September after a severe contraction in the previous quarter, likely solidifying the view that premier Shinzo Abe will delay a second sales tax hike next year.

The preliminary figure for gross domestic product (GDP) compared with a 2.1 percent increase forecast by economists in a Reuters poll. It followed a revised 7.3 percent contraction in the second quarter, which was the biggest slump since the March 2011 earthquake and tsunami, Cabinet Office data showed on Monday.

On a quarter-on-quarter basis, the economy shrank 0.4 percent in the third quarter.

Private consumption, which accounts for about 60 percent of the economy, rose 0.4 percent from the previous quarter, a sign that an increase in Japan’s sales tax to 8 percent from 5 percent in April continued to take a toll. That compared with a median market forecast for a 0.8 percent increase.

Reporting by Leika Kihara and Tetsushi Kajimoto; Additional reporting by Chris Gallagher

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