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Economy

Japan's Q4 GDP downgraded to annualized 7.1% contraction

Consumption tax increase takes blame for first negative growth in 5 quarters

The shrinkage in Japan's real gross domestic product corresponds to a 1.8 percent decrease on a seasonally adjusted quarterly basis, according to the Cabinet Office.

TOKYO (Kyodo) -- Japan's economy in the October-December period of last year shrank an annualized real 7.1 percent from the previous quarter, revised down from the 6.3 percent contraction initially reported, government data showed Monday.

The shrinkage in real gross domestic product, or the total value of goods and services produced in the country adjusted for inflation, corresponds to a 1.8 percent decrease on a seasonally adjusted quarterly basis, according to the Cabinet Office.

The first GDP contraction in five quarters, which came after Japan raised the consumption tax rate to 10 percent from 8 percent last October, was worse than the average 6.8 percent annualized shrinkage forecast by private-sector economists polled by Kyodo News.

The result compares with an annualized 7.4 percent slump logged in the April-June quarter of 2014 after the previous consumption tax hike from 5 percent to 8 percent in April that year.

Capital expenditure dropped 4.6 percent from the previous quarter, deteriorating from the preliminary reading of a 3.7 percent fall.

Private consumption, which accounts for more than half of Japan's economy, decreased 2.8 percent, upgraded from the initial reading of a 2.9 percent drop.

Public investment grew 0.7 percent, downgraded from 1.1 percent growth.

Nominal GDP, which is not adjusted for inflation, contracted an annualized 5.8 percent in the reporting quarter, down from a 4.9 percent shrinkage.

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