Japanese GDP Plunges 6.8% As Consumer Spending Collapses By Most On Record

Tyler Durden's picture

Compared to the 3.6% drop in GDP when Japan last hiked its consumption tax in 1997, today's Q2 GDP collapse of 6.8% annualized is an utter disaster (even if it is slightly better than the expected -7.0% expectations thanks to a surge in the deflator). Inventory additions added 1.0% growth. Consumer Spending collapsed 5.2% QoQ - the most on record. Of course, in the traditional of Keynesian hockey-sticks, this XX% collapse in Q2 is expected to surge back to a 2.5% growth figure in Q3 and lead Japan to the holy grail once more.. only it didn't quite work out that way last time for Japan. Simply put this is the worst posible outcome for bulls, small beat not enopugh to rejuice QQE. As a gentle reminder of just what happened in 1997 - the last time Japan hiked taxes - we provide the eerily analog chart below...


Japanese GDP growth was almost twice as bad as the last time Jap[an hiked its taxes...


As Consumer Spending collapsed...


Here come the hockey-sticks...


*  *  *

Let's hope the last 10 months was just coincidentally 90% correlated to 1997!!


And remember - they were quantitatively easing then too!

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fonzannoon's picture

"even if it is slightly better than the expected -7.0% expectations"

 - perspective

NoDebt's picture

Yep, beating expectations ALL the way down.

VATICANT's picture

Definitely going to be a global collapse. Wasn't Japan always the second largest economy?? How many US Ts??

max2205's picture

Now back to the Kareoke Bar!

Elvis the Pelvis's picture

That's a huge collapse.  But a lot this shit comes down to demographics.  Too many oldsters.  Perhaps they need a Logan's Run solution.  Bitchez.

Mike in GA's picture

Kyle Bass called it first.  It's playing out pretty much as he thought just not as quickly.  Then again, the can kicking has gone on longer than most observers ever thought it would. 

Japan is world's 3rd largest economy now at 8% of world GDP, behind China's 12%.

This graph  shows US debt distribution including Japan & China as of 11/13.

BrosephStiglitz's picture

Not really that much of an amazing call from Bass.  I have been telling the macroeconomists since May 2013 than Abenomics looked like the last desperate dice roll of a failing government.  Nobody listened, hell they even overruled me and the official line was that Abenomics was a "prudent macro policy."  The last talk we had was right before the tax hikes went in (and consumer spending was primed to avoid govt. tax grabs).

So, part of me is highly amused by these charts (because it's good to be right), but then I remember all the families and lives that are getting turned upside down on the back of this stupid political scene, and I just feel bad for the Japanese people.  Long nailguns when the Japanese bond market collapses and the Japanese investors (majority of debt held internally) get a donkey-punch from reality.

PS see next: The Japanese Crisis- coming to a Eurozone near you.  No doubt that this will be the deflationary event of the century, followed by the hyperinflationary event of.. well the century I guess?

knukles's picture


This, people is exactly where the US is headed.  Higher taxes (massive under Obamacare alone) more government spending, unlimited QE'ing, more regulatory interference.  Plus, we got a whole buncha brand new human welfare enrollees flooding the country illegally, let alone spending bazillions killing people in far reaching lands who represent no existential threat whatsoever to our well being, whatsoever.
Every single trend is intact.
Equities will get monkey hammered (possibly just over a long dismal grinding time) bond yields are going to drop and the Reign of Empire is Past.
De-dolarization it self will prohibit the largesse of the Federalies, demanding that total expenditures be decreased by some 50%.
That's the math.

The problems are structural driven my non-monetary affairs which the central banks of the world remain incapable of addressing.

The 4 Horsemen Are In The House!
with elvis, of course 


BringOnTheAsteroid's picture

The prophesy of the 4 horsemen sure was, um , prophetic in so far as galloping in on horses. If they were supposed to be arriving in GM cars this could go on a long, long time. 

dirtscratcher's picture

Except for Krugman's. I think he was hoping for moar.

knukles's picture

Krugman is an economic sophist to be dismissed and ignored.
coulda said asshole, but that would be the same as his ad homenim attacks, so I won't call him the asshole he deserves to be called

oudinot's picture

"Sophist" is much more accurate and classier than ,"asshole"

Good call.

aVileRat's picture

Yup. Fucking love all those mutual fund managers talking about the "significant value" seen in Japanese bonds & stocks.

Expect the August numbers to be "seasonally" revised upwards on lower import's, which of course is bullish for Sammie bonds and Tokyo tax revenues.


Greenskeeper_Carl's picture

All they gotta do is start adding in hookers and blow to their calculations. That will fix everything, just ask the Italians.

The Most Interesting Frog in the World's picture

If only they had Mexico on their southern border. Oh the possibilities.... Refried bean sashimi and a whole new generation of Spanish speaking freeloaders.

duo's picture

worse than that.  Lots of those kids speak Mayan or some other dialect and not Spanish.  Of course the schools have to provide bilingual education so they are scrambling to find Mayan speakeers before the lawsuits fly.

I knew a waiter in Cozumel that spoke Mayan.  Maybe he could get a visa.

The Most Interesting Frog in the World's picture

How do you say, "Visa? I don't need a fucking Visa!" In Mayan?

jballz's picture

You tattoo some shit on your face and say nothing.

Idleproc's picture


Working in politics and in public offices.
Not contribute to GDP.


ekm1's picture

So, still have doubt's on my economic forecasts?

fonzannoon's picture

Your forecasts are fantastic. It's the market reaction to the forecasts that are concerning.


ekm1's picture


That is not a market

That is a video game

robertocarlos's picture

If I'm so smart, how come I'm not rich?

ekm1's picture

Taking risks and lots of luck makes you money, not smartness

Tall Tom's picture

That is pretty sad. That sounds like blind gambling rather than capitalism.


Las Vegas is actually better as there are some games where you have the advantage, and, if you use your mind, then you can use your mathematical talents to make money.


I suppose that some of those advantage games still exist in the Wall Street Casino. But that used to be the rule rather than the exception.

NoDebt's picture

Though the question wasn't directed at me, I'm familiar with them and I think you're a bit of an optimist.

Have you considered long-dated USTs?  Might want to lock in those 3% yields now or you might suffer from regret later.

ekm1's picture

100 day TD bank gsc. Thats it until triple Lehman 

NoDebt's picture

Ah, you're just afraid to reach for a little yield!

Tall Tom's picture

Think Argentina CDS will be contained?

Greenskeeper_Carl's picture

You are referring to your GDP forecasts, correct? If so I dont doubt they will be pretty close to dead on. What I do doubt is that all of those countries you predicted will admit to numbers as bad as those, especially the US.

Slave's picture

Wow. This article destroys the "beat". Well done.

shouldvekilledthem's picture

Bitcoin users are not affected. :)

BringOnTheAsteroid's picture

Well of course not, because you lost your gold, remember,in a horrible boating accident. 

RiderOnTheStorm's picture

I had a summer gold and i was miserable

Yen Cross's picture

   Abe go > Blub...Blub...Blub. The Japanese pension funds have been reary patient with Abe.

    I'm curious to see what the next U.S. long term auctions yield. This is a slow motion train wreck.

Yen Cross's picture

   Goose, next week the BoJ and BoE start their policy meetings for 2015.

      I'm still trading the range,(101-102.50)   I think Kyle Bass is spot on, but missed it by a few quarters. I'have my reversals set if anything happens. ;-)

    There's still some more news later/

   JPY         Core Machinery Orders (YoY)           3.3%     -14.3%      
       JPY         Core Machinery Orders (MoM)           15.3%     -19.5%     Tomorrow.

GooseShtepping Moron's picture

Thanks, very interesting. I'll never cease to be fascinated by Japan, even in decline.

I always give this guy a plug even though he is no longer active, simply because (barring an old deceased friend of mine) I've never seen a blogger write with more integrity, depth, and beauty.


The Most Interesting Frog in the World's picture

Yeah but the Pacific Ocean glows in the dark now. It's not all bad news.

Wait What's picture

you're not kidding. water off the coast of california has never been (in my lifetime) as turquoise as it has been this year. pacific wildlife dying off has done wonders for the clarity of water along the west coast.

knukles's picture

It'll all save on electric costs in the end, so ecologically sound irradiation policies

                       One lump or two, my dear?

ebworthen's picture

90% correlation to '97; ooops!

This demonstrates that printing money, not paying decent rates to savers, and off-shoring production and career employment benefits two groups - bankers and politicians.

The citizens get screwed over a barrel; but that is the purpose of Central Banks to begin with so...

Cognitive Dissonance's picture

Expect this to be revised down over the next few months and bottom out around (10%).

Wait What's picture

only way to go from there is up! right?

Winston Churchill's picture

I'm a great believer in starting at the bottom, and working my way down.