Japan's economy contracts in Jan-March, as spending lags

16 May, 2018, 14:00 | Author: Brooke Harris
  • Koichi Kamoshida  Getty Images Koichi Kamoshida  Getty Images

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

"Comparing the different components of demand with our earlier forecasts, the q-q decline (-0.1%) in real private-sector capex and the q-q rise (+0.0%) in real public fixed capital formation both come as something of a surprise".

But some economists believe the drop would be temporary.

"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".

Private residential investment also plunged another 2.1 per cent after a 2.7 per cent fall in the previous quarter. "Consumers will keep purse strings tight unless the pace of wage increases shows a clear acceleration", said SMBC Nikko Securities Chief Market Economist Yoshimasa Maruyama.

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Japan's gross domestic product was down 0.2% on quarter in the first three months of 2018, the Cabinet Office said in Wednesday's preliminary reading.

The Japanese economic system has been comparatively wholesome in latest quarters, selecting up from the doldrums that spanned earlier a long time, on extraordinarily free lending and a authorities program created to combat deflation - the continuous spiraling down of costs.

Exports rose 0.6 percent.

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

Japan's government is preparing for its annual announcement of guidelines for economic and fiscal policy, but the government has been distracted by allegations of cronyism that have hurt Abe's approval ratings.

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