The Japanese economy grew more slowly than forecast in the second quarter, increasing the pressure on Prime Minister Shinzo Abe as he ponders whether to raise taxes to bring down the enormous public debt or boost measures to consolidate economic recovery.
Though the world's No. 3 economy grew for the third consecutive quarter, the annualized rate of expansion between April and June of 2.6 percent fell short of analysts' expectations of a 3 percent growth.
Statistics indicate that the aggressive stimulus measures launched by Abe after taking power in December failed to make the Japanese economy take off, even though the Tokyo stock market has risen 30 percent and the yen has dropped 16 percent against the dollar.
Domestic consumption, which makes up 60 percent of Japanese GDP, and exports, which account for most of the rest, grew by 0.8 percent and 3 percent, respectively, in the second quarter compared with the previous three months.
Corporate profits also enjoyed strong growth in the April-June period, but private investment fell 0.1 percent.
Within this context, Abe and his conservative Liberal Democratic Party face the dilemma of whether or not to implement a planned increase in the value-added tax rate from 5 percent to 8 percent.
The measure, pushed insistently by international organizations, seems necessary for improving Japan's finances, where public debt is approaching 250 percent of GDP.
Nonetheless, the LDP is aware that a VAT hike could sink consumption, put the brakes on recovery and make even more one-sided the ratio of debt to GDP. EFE