Japan could be flirting with recession after the weakest factory output since 2011, which, following a surprising fall in exports last week, could pressure the central bank to ease policy and complicate a decision on whether to raise taxes.
The severe contraction in output and pileup of inventories after an April increase in the national sales tax are much worse than after the previous tax hike in 1997, which ushered in a steep recession, government data showed on Wednesday.
Two months of unexpected export declines from the world's third-biggest economy, meanwhile, are calling into question the Bank of Japan's case that shipments overseas would by now be taking up the slack from the tax hike's blow to consumption.
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