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Japan Economy Contracts in the First Quarter

Japan Economy Contracts in the First Quarter

Japan's economy contracted more than expected at the beginning of this year, suggesting growth has peaked after the best run of expansion in decades, unwelcome news for a government struggling to get traction for its reflationary policies.

Japan's economy, the world's third largest, contracted by 0.6 percent on an annualized basis, a much more severe contraction than the median estimate for an annualized 0.2 percent drop.

The contraction, which was driven by a decline in investment and consumption and weaker exports, comes as Japan Inc worries about the possible effect of U.S. President Donald Trump's protectionist policies on global trade.

Economy Minister Toshimitsu Motegi said there was no change to the government's view that the economy was recovering moderately, predicting a resumption in growth to be driven mainly by private consumption and capital expenditure.

External demand, or exports excluding imports, added 0.1 percentage point to first-quarter GDP, as imports slowed more than exports.

However, a breakdown of the data shows export growth is losing momentum, growing just 0.6 percent in the first quarter after growth of 2.2 percent in the fourth quarter.

Recent data marked the end to eight consecutive quarters of economic growth, which was the longest sequence of expansion since a 12-quarter run between April-June 1986 and January-March 1989 during the asset-inflated bubble economy.

Fourth quarter growth was revised to an annualized 0.6 percent, down from the 1.6 percent estimated earlier.

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