What's going on?

Things are looking pretty bleak for Japan: data released on Monday showed the country�s economy shrank at its fastest rate in years last quarter.

What does this mean?

The world�s third-largest economy shrank at its fastest rate of decline since 2014, and far quicker than investors were expecting. That acceleration may have something to do with a sales tax that arrived back in October: consumer spending saw an 11% drop in the last three months of 2019, dragging down the Japanese economy as a whole.

This isn�t a first for Japan, with a 2014 tax increase having had a similar effect. So the government did take some pre-emptive economy-boosting measures to help cushion the effects. But Monday�s data seems to suggest they didn�t work � and given that Japan’s central bank has already lowered interest rates into negative territory, there�s not much it can do either.

Why should I care?

For markets: Japanticlimax.
Even if investors brush off the sales tax hike as a one-off, it�s not like Japan�s outlook is particularly bright: the country�s economy is expected to suffer a fresh hit from the coronavirus outbreak. And if that leads its economy to shrink again in the first quarter of 2020, that would put Japan in a recession � i.e. two consecutive quarters of economic decline. Investors are starting to get nervous at the thought, which might be why Japanese stocks fell on Monday.

The bigger picture: Tourist trap.
Chinese tourists� money has become an important part of the Japanese economy, and there was some good news on that front on Monday, at least. China pledged to implement its own economy-boosting measures to help deal with the economic blow from the coronavirus outbreak, which could include lower taxes and interest rates. That, in turn, should increase Chinese citizens� purchasing power at home and abroad.