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Japan's gross domestic product shrank an annualized 1.6 percent in the third quart of 2014, said a government data released Monday, marking the second straight quarter of economy retreat.
The data also said that real GDP of Japan in the reporting quarter was down 0.4 percent from the previous quarter, while consumer spending, the largest component accounting for around 60 percent of Japan's GDP, rose 0.4 percent in the reporting period.
The figure was far lower than median economists' expectations for the economy to grow about 2.2 percent.
The preliminary data is an important indicator for Prime Minister Shinzo Abe to decide whether to carry out the second round of sale tax hike from 8 percent to 10 percent in October next year.
The Japanese economy contracted an annualized real 7.1 percent in the second quarter of 2014 in the wake of the first round of tax change carried out on April 1 from 5 percent to 8 percent.
Monday's unexpected GDP news sent stocks in Tokyo lower, with the 225-issue Nikkei Stock Average plunged 453.18 points, or over 2 percent, from a seven-year high on Friday to end the morning session at 17,037.65, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange fell 29.22 points to 1, 371.19.
Meanwhile, State Minister for Economy and Finance Akira Amari said the GDP retreat was due to slow recovery of spending, adding the impact of the first round sales tax hike is bigger than expected, according to Japan's Kyodo News.
The weaker-than-expected read would lead Abe, who will return from Australia Monday after a summit of the Group of 20, to dissolve the lower house and call a general election so as to delay the planned consumption tax hike that prescribed by law.
Amari also said Tuesday that the government would make the decision on whether or not to delay the second round tax change on Tuesday or later and speculation here showed that the prime minister may delay the tax change to April 2017.
Local reports said that Abe would dissolve the lower house on Wednesday but the plan may be delayed to Friday as the government wants two bills to be approved by the current Diet session.
Analysts here said that with support rate for Abe's cabinet declining, it is sophisticated now to dissolve the lower house and call an election as the Abe's Liberal Democratic Party may still have a large chance to win again and that victory could extend Abe 's rule to 2018.
Liberal Democratic Party bigwig Shigeru Ishiba said Sunday maintaining majority control of the House of Representatives will be the goal for the ruling LDP-led coalition if Prime Minister Shinzo Abe dissolves the lower house and calls a general election, according to local report.
