Japan, the world’s third-largest economy, has unexpectedly slid into recession.
This comes after a rise in the national sales tax from five percent to eight percent resulted in reduced consumer spending.
The tax hike was part of a plan to curb Japan’s huge public debt, the worst among advanced nations.
Japanese Economy Minister Akira Amari said the April sales tax hike had made it harder than anticipated for the public to shake off their deflationary mindset.
“When making a decision about tax hikes, we need to be careful not to slow down economic recovery. What’s most important is not to let it go back to deflation,” said Amari.
Japanese media have suggested the country’s prime minister may delay a planned second rise in sales tax to ten percent, scheduled for October next year.
Prime Minister Shinzo Abe is also expected to announce a snap election for as early as December to underpin his so-called Abenomics policies to re-energise the economy.
A senior lawmaker argued that the prime minister’s strategy was working, but needed more time.
However, a recent poll by Japanese public television station NHK showed support for Abe had plunged 8 percentage points in just one month.
The benchmark Nikkei stock average posted the biggest drop since August on the surprise recession. It shed three percent to close lower on Monday.