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Japan's economy just shrunk for the first time in over 2 years

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.

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

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

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

Japan's economy relies on exports of electronics, among other products.

In the first quarter exports expanded by 0.6% after 2.2% growth in the previous quarter.

But potential fallout from Sino-U.S. trade frictions and global protectionism cloud the outlook for Japan's export-reliant economy in the coming quarters, they say.

Domestic demand lopped 0.2 percentage points (ppts) of quarterly growth, driven lower by declines in housing investment and private business inventories.

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

The capital spending figures may presage data due on Thursday that is forecast to show core machinery orders, a leading indicator of capital expenditure, fell in March for the first time in three months.

On a quarter-on-quarter basis, GDP shrank 0.2 per cent, versus the median estimate for a GDP to remain unchanged.

Maruyama of SMBC Nikko Securities.

Japan's economy just shrunk for the first time in over 2 years