Sunday, 20 May, 2018

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

Watch video 01:22  Japan's economic upswing comes at a cost Watch video 01:22 Japan's economic upswing comes at a cost
Nellie Chapman | 16 May, 2018, 09:30

Japan's economy contracted at an annualized rate of 0.6%, marking the end of eight consecutive quarters of economic expansion.

The economy was stalled by stagnant private consumption, which was flat in the January to March period after an uptick of 0.2 percent in the final quarter of previous year.

GDP is expected to be flat on quarter and slip 0.1% on year after adding 0.4% on quarter and 1.6% on year in the three months prior.

"The Japanese economy should see a modest recovery buoyed by the global economy, with exports in particular benefitting from this, helping Japan's GDP revert back to an uptrend from Q2 2018 onwards", he said in a commentary earlier this week.

Exports rose 0.6 percent.

"Private consumption and public demand were flat while investment spending and net exports fell slightly", he said in a note to clients.

Slower export growth reflected a decline in shipments of mobile phone parts and factory equipment in the quarter, a government official said. However, there are concerns that trade friction with the U.S. could affect demand for exports.

"The economy is unlikely to continue to contract further".

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

But SMBC Nikko Securities chief market economist Yoshimasa Maruyama warned that private consumption was weak even when the special factors were taken into consideration.

A sales tax hike to 5 percent from 3 percent in 2014 caused a large fall in consumer spending and tipped the economy into recession. The median estimate was for consumer spending to remain unchanged.

"The revised GDP data 2017 showed the economy had already started to slow down from the beginning of a year ago".