Japan's economy expected to show sluggish growth in first quarter

Wednesday, 16 May, 2018

That snaps a run of eight quarters of consecutive growth, the longest Japan has achieved since the boom days of the late 1980s.

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

Economists polled by Reuters suggest Japan's economic growth has decreased by an annualised rate of 0.1% in the first quarter of 2018 after recording 1.6% growth in the final quarter of 2017. Economists has forecast annualized contraction of around 0.2%.

Private consumption accounts for about 60% of Japan's economic activity.

Capital expenditure likely rose 0.4 percent, versus a 1 percent gain in the previous quarter, led by demand for factory automation and labor-saving technologies as companies tried to cope with a labor shortage.

"The economy maintains momentum towards recovery but exports are slowing as global growth seems to have peaked in the fourth quarter", said Ryutaro Kono, chief economist at BNP Paribas Securities. However, there are concerns that trade friction with the U.S. could affect demand for exports.

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

The median estimate was for consumer spending to remain unchanged.