Japans economy shrank for a second consecutive quarter, with the unexpected contraction increasing the odds Prime Minister Shinzo Abe will postpone a sales-tax increase.

Gross domestic product shrank an annualized 1.6 percent in the three months through September, the Cabinet Office said today in Tokyo, compared to the median forecast for 2.2 percent growth in a Bloomberg News survey of economists. Unadjusted for price changes, the economy contracted an annualized 3 percent.

Abes administration is seeking to shore up public support after Aprils levy increase triggered the deepest contraction in more than five years. Etsuro Honda, an adviser to the prime minister, said last week a tax increase is out of the question if growth is less than 3.8 percent.

The 3 percentage point increase in the sales tax in April has pushed up the cost of living, straining households that are pressured by rising prices as the central bank pumps record stimulus. With inflation outpacing wage growth, a further bump in the levy slated for next October risks hurting consumption and undermining Abes support.

Source : Bloomberg