Japan has suffered its worst economic contraction since the earthquake and tsunami more than three years ago, providing evidence that consumer and business confidence in the country remain fragile despite the bold stimulus programme of the Shinzo Abe government.

The economy shrunk by an annualised 6.8 per cent in the second quarter after an increase in the national sales tax triggered a sharp fall in consumer spending. The contraction was a shade milder than the latest market forecasts but still far more severe than most experts had forecast when the tax rise took effect in April.

Its scale, and the fact that it is the first notable quarterly reversal since Mr Abe took office in 2012, will embolden sceptics of the prime minister’s expansionary so-called Abenomics policies. His administration has increased public spending and backed a furious monetary expansion by the Bank of Japan, which has been pumping record amounts of money into the economy by buying up government debt. However, such supports were not enough to keep the 3-percentage-point tax rise from rattling consumers and businesses.