Japan GDP Slides In 1st Quarter Ending 8 Quarters Of Growth

Dwayne Harmon
May 16, 2018

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.

"This figure is worse than the consensus (Bloomberg survey median) forecast of -0.1% q-q annualized, but in line with our forecast". However, there are concerns that trade friction with the USA could affect demand for exports.

"But we need to be mindful of the impact of overseas economic uncertainty and market volatility", he said. Results for Q1 2018 show that the economy shrank by 0.6% on an annualised basis, bringing to an end two years of growth.

They say the preliminary real GDP fell 0.2 percent from the previous quarter.

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

Economists say while the contraction is temporary, the rebound will not be almost as strong as previous quarters.

Nominal GDP was down 0.4% on quarter, missing expectations for a gain of 0.1% following the 0.1% gain three months earlier.

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Private residential investment also plunged another 2.1 per cent after a 2.7 per cent fall in the previous quarter.

But consumer spending has remained stubbornly lacklustre, with companies staying stingy on wage hikes despite healthy profits.

It was the first decline in nine quarters, snapping the longest stretch of continued expansion since the late 1980s.

"The economy is unlikely to continue to contract further".

But SMBC Nikko Securities chief market economist Yoshimasa Maruyama warned that private consumption was weak even when the special factors were taken into consideration.

Nevertheless, wages are finally showing signs of picking up and Minami from Norinchukin said that would feed through into consumer spending in the coming months.

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