The rise in sales tax in April in Japan is having a longer-lasting dampening effect on consumers than first forecast.
Business investment also fell in the third quarter, so figures have been revised down showing the economy shrank more than expected. This justifies Prime Minister Shinzo Abe’s decision to postpone a second tax rise, but it means contraction is close to two percent year-on-year, nearly four times worse than forecast.
Abe’s economic policies face an electoral test on Sunday, and he is forecast to win by a landslide. But some analysts say unless wages grow faster his policies will fail.