Elderly japan shopperREUTERS/Kim Kyung-HoonA shopper browses for goods at Aeon, Japan’s second largest retailer.

Japan’s GDP fell 6.8% in Q2.

This was a sharp reversal from the 6.1% spike we saw in Q1.

While the drop is jarring, it wasn’t totally unexpected. In fact, economists were actually forecasting a 7.0% decline.

Late in 2013, Japan announced a consumption tax hike that would go into effect in April. This caused Japanese consumers to shop like crazy in Q1 in anticipation of the tax.

In economics, this is called pulling forward demand.

Consumer spending dropped by 5.2% in Q2, which was worse than the 3.7% decline expected.

None of this is new to Japan.

Ahead of the report, Nomura’s Yasuhiro Takahashi noted that consumer spending plunged 3.5% in Q2 1997 after a similar planned consumption tax hike, which went into effect in 1997.

Additionally, Takahashi noted that sampling bias might make consumer spending appear worse than it really is.

“In the first preliminary estimates for Q2 1997 there was a sharp fall in consumer spending (down 5.7%; 12 September 1997 edition of the Nikkei), which was then revised up as GDP statistics were revised,” he said. “We could see a similar narrowing of the size of decline this time as well.”

Japan’s Nikkei is up modestly early in Asia’s Wednesday trading session. So, no big deal.

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