Japan’s economy shrank an annualised 7.1 per cent in April-June from the previous quarter, more than a preliminary estimate, underscoring concerns the hit from an April increase in the sales tax may have been bigger than expected.

The revised contraction was the biggest since January-March 2009, when the global financial crisishit Japan’s exports and factory output, keeping policymakers under pressure to expand fiscal and monetary stimulus should the economy fail to recover from the disruption of the April tax hike.

It was revised down from a preliminary 6.8 percent drop, according to Cabinet Office data released yesterday, and was more than the median market forecast for a 7.0 per cent decline in a Reuters poll of economists.

On a quarter-to-quarter basis, the economy shrank 1.8 per cent in the second quarter, compared with a preliminary reading of a 1.7 per cent contraction.

The revision was largely due to a bigger than expected decrease in capital expenditure and a deeper decline in consumer spending, suggesting the economy could struggle to overcome the April sales tax increase.

Separate data showed the current account swung back into surplus in July, reflecting higher earnings on overseas investments.

The surplus stood at 416.7 billion yen (2.44 billion pounds), compared with economists’ forecast for 444.2 billion yen. That followed a shortfall of 399.1 billion yen in June, which marked the first deficit in five months.

The pace of growth from July will be crucial to Prime Minister Shinzo Abe’s decision, on whether to proceed with a scheduled second increase in the sales tax to 10 per cent in October next year.