(Bloomberg) -- Japan’s economy shrank for the first time in two years during the first quarter, contracting more than expected on a surprise fall in business spending. Yet economists expect a rebound in the current quarter as the global economy regains traction.
Key Takeaways
Japan’s economy had expanded at well above its potential growth rate for a year, as strong export growth fueled production and investment, helping to raise wages and inflationary pressures. The first-quarter slowdown likely sapped progress on inflation -- Goldman Sachs (NYSE:GS) predicted core inflation fell in April to 0.7 percent. Yet most economists see GDP rebounding in the current quarter, fueled partly by better export growth and production.
Economist Views
- “Consumer spending dipped because of weather reasons, heavy snow,” Hiroaki Muto, chief economist at the Tokai Tokyo Research Center, said before the results were released.
- Muto said slowing export growth is more significant. "We have to keep a close eye on whether there’s a recovery in the second quarter,” he said. "The dip is probably temporary, and I don’t see GDP contracting in the April-June quarter, but it’s possible that a longer-than-expected global economic soft patch is beginning to have an effect on the Japanese economy."
- Downward pressure from inventories and a fall in housing investment also contributed to the first-quarter slowdown, Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, wrote in a report before the release.
Other Details
- Measured quarter on quarter, GDP shrank 0.2 percent (estimate unchanged).