A revised reading on Japan's gross domestic product (GDP) showed the economy contracted an annualized 7.1 percent in the second quarter, worse than initial estimates of 6.8 percent as a nationwide consumption tax that took effect in April dragged on its recovery.
This marked the biggest contraction since the first quarter of 2009, when the global financial crisis hit Japan's export sector, and was worse than expectations in a Reuters poll for a revised reading of 7.0 percent.
On a quarterly basis the economy contracted 1.8 percent, wider than an initial reading of 1.7 percent.
"While the headline [quarterly] figure was in line with expectations, the details were rather discouraging: non-residential investment was revised from a 2.5 percent [quarterly] fall to a 5.1 percent [quarterly] plunge. The only reason why overall demand didn't decline even more sharply was that inventories bolstered output by 1.4 percentage points instead of the initially estimated 1.0," Marcel Thieliant, Japan economist at Capital Economics, said in a note.
"Looking ahead, output will probably rebound only modestly in the third quarter. Industrial production was still 2 percent below the Q2 average in July, and we have yet to see a turnaround in capital spending," Thieliant added.
Markets were little changed on the news. The Nikkei snapped their two-day losing streak to breachthe 15,700 level while then yen traded steady against the U.S. dollar.