Japan's economy shrinks in January-March quarter

Woman in a Kimono makes her way at a shopping district in Tokyo

Japan's economy contracted at an annualized rate of 0.6%, marking the end of eight consecutive quarters of economic expansion.

The Japanese economy shrunk in early 2018, recording its first quarterly contraction since late 2015.

On a seasonally adjusted annualized basis, GDP was down 0.6% - again missing forecasts for a decline of 0.1% following the downwardly revised 0.6% gain in the previous three months.

Japan's Economy Minister Toshimitsu Motegi said on Wednesday there was no change to the government's view that the economy was recovering moderately. In the first quarter exports expanded by 0.6% after 2.2% growth in the previous quarter.

Japan's economy slid into reverse for the first time in 2 years at the beginning of the year, hit by sluggish consumption and a winter cold snap, but analysts predicted the world's third-largest economy would quickly rebound.


This is a concern for Japanese manufacturers because many of these machines and electronic components are sent to China, where they are used to produce goods for export, but this trade is at risk if the Trump administration's threatened tariffs on Chinese exports go ahead.

Economists don't expect the period of contraction to last long.

"There are worries about some emerging economy markets but the global economy as a whole is likely to continue its recovery for some more time".

"There wasn't any particular driver for the weakness — private consumption and public demand were flat while investment spending and net exports fell slightly", Marcel Thieliant of Capital Economic said in a commentary. The median estimate was for consumer spending to remain unchanged.

Maruyama of SMBC Nikko Securities.

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