Japan economy shrinks for first time in 2 years

Koichi Kamoshida  Getty Images Koichi Kamoshida  Getty Images

Koichi Kamoshida Getty Images Koichi Kamoshida Getty Images

The poor first quarter snapped a string of eight straight quarters of expansion for the Japanese economy, which had marked the longest such streak in more than three years.

Japanese government data on preliminary GDP figures for the January-to-March period shows that the country's economy shrank for the first time in 9 quarters.

Also, the yen strengthened against other major currencies on safe-haven buying, clouding the prospects for Japanese exporters.

Capital expenditure fell 0.1 percent, down for the first time in six quarters, suggesting corporate investment is not as strong as many economists had forecast.

Private consumption was flat after an improvement of 0.2% in the final quarter of previous year. "Real private-sector final consumption was down slightly (-0.0% q-q) and real exports slowed from +2.2% q-q in 2017 Q4 to +0.6% in 2018 Q1".

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The limp first-quarter performance was spread across different areas of the economy, according to Marcel Thieliant, senior Japan economist at research firm Capital Economics.

"Globally, IT-related items have been in an adjustment phase, which weighed down Japan's exports and factory output", said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

Abe has launched a pro-spending policy blitz called "Abenomics" since he took office in late 2012, combining ultra-loose monetary policy and fiscal stimulus in a bid to pep up the former Asian economic powerhouse. The median estimate was for consumer spending to remain unchanged.

Nevertheless, wages are finally showing signs of picking up and Minami from Norinchukin said that would feed through into consumer spending in the coming months.

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