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Japan’s Q1 GDP likely shrank less than initially expected


Milder contraction: A worker cycles at a port in Tokyo. The economy probably shrank an annualised 0.4 in the first quarter, less than a preliminary reading of a 0.6 contraction. — Reuters

Milder contraction: A worker cycles at a port in Tokyo. The economy probably shrank an annualised 0.4 in the first quarter, less than a preliminary reading of a 0.6 contraction. — Reuters

TOKYO: Japan’s economy likely shrank less than initially estimated in the first quarter, reinforcing views that it will quickly regain traction in the coming months, a Reuters poll found.

Weighed down by weak domestic demand and a slowdown in exports, the world’s third largest economy probably shrank an annualised 0.4% in the first quarter, less than a preliminary reading of a 0.6% contraction, the poll of 16 economists showed.

On a quarterly basis, growth was expected to dip 0.1%, marginally less than a 0.2% fall indicated in preliminary data. Revised figures will be released tomorrow.

Expectations of a milder contraction were driven by a less pessimistic view of company spending.

Capital expenditure was seen rising 0.2% for the quarter, up from a 0.1% decline in the preliminary data.

“The expected upgrade in capital spending likely helped the GDP to revise up,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

“The economy came to a temporary standstill at the beginning of this year after having grown solidly.”

Many economists project the economy will rebound in April-June and return to a moderate growth trend, but weak data on Tuesday raised the possibility of a recession.

Household spending unexpectedly fell in April and services sector activity slowed in May. Industrial production also grew less than expected in April.

“We expect the economy will grow in the second quarter but the latest data suggest we need give heed to a possibility of a slower pace of recovery than previously expected,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley.

The first-quarter contraction ended Japan’s longest period of economic expansion since its 1980s bubble economy. — Reuters

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