Japan Q1 GDP contracts annualised 0.6%: government

Daniel Fowler
May 16, 2018

Japan's economy contracted more than expected at the start 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.

Economists say while the contraction is temporary, the rebound will not be almost as strong as previous quarters. However, there are concerns that trade friction with the United States could affect demand for exports.

Private consumption, the largest part of the Japanese economy, was unchanged, a result that was in line with market expectations.

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

A contraction would mark the first decline in gross domestic product (GDP) in nine quarters, ending the longest run of growth since a 12-quarter streak from April-June 1986 to January-March 1989 during Japan's economic bubble.

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As of 9:15 a.m. local time, the 225-issue Nikkei Stock Average dropped 47.21 points, or 0.21 percent, from Tuesday to 22,770.81.

On a quarter-on-quarter basis the economy shrank by 0.2%.

Private consumption, which makes up about 60 percent of the economy, probably stood flat after a 0.5 percent gain in the fourth quarter.

The surprise quarterly decline saw the seasonally-adjusted annual rate decline to -0.6%, below the -0.2% level forecast by economists.

Maruyama of SMBC Nikko Securities.

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