Japan GDP Logs 1st Contraction in 9 Quarters

May 16, 2018

Tokyo- Japan's gross domestic product shrank for the first time in nine quarters in January-March, dampened chiefly by weak personal consumption, government data showed Wednesday.

The country's seasonally adjusted GDP in the final quarter of fiscal 2017 fell 0.2 pct from the previous quarter in price-adjusted real terms, the Cabinet Office said.

On an annualized basis, the GDP declined 0.6 pct, the government agency said in a preliminary report.

The annualized result compared with the median forecast of a 0.2 decline among the 20 economic research institutes surveyed by Jiji Press.

Domestic demand pushed down the real GDP by 0.2 percentage point on a quarterly basis. By contrast, the contribution from external demand stood at plus 0.1 point.

Personal consumption edged down due to bad weather, including cold waves, and a surge in vegetable prices. Also sluggish were corporate capital expenditures.

In nominal terms, January-March GDP fell 0.4 pct, or an annualized 1.5 pct, posting the first drop in six quarters.

Despite the GDP contraction, Economic and Fiscal Policy Minister Toshimitsu Motegi said the Japanese economy remains on a medium- to long-term recovery trend.

"The economy is recovering moderately," he said in a statement.

Takeshi Minami, chief economist at the Norinchukin Research Institute, said that the GDP drop is a one-off move.

"The GDP is expected to return to positive growth in April-June, reflecting a rise in employee compensation and a pickup in personal spending," he said.

In January-March, personal consumption fell by less than 0.1 pct, the first drop in two quarters.

Unstable weather conditions led to a decrease in dining-out spending. In addition, sales flagged for mobile telephones and automobiles.

Capital expenditures slipped 0.1 pct, down for the first time in six quarters, chiefly weighed down by weak investment in communications equipment.

Housing investment declined 2.1 pct, losing ground for the third straight quarter, reflecting a drop in construction starts.

Public investment was flat, as effects from projects financed with a supplementary budget waned.

Exports grew 0.6 pct, rising for the third consecutive quarter, led by strong demand for automobiles.

Imports rose 0.3 pct, the second straight advance. Brisk demand for drugs helped.

For fiscal 2017, which ended in March, the country's real GDP grew 1.5 pct from the previous year, rising for three years in a row.

Nominal GDP came to some 548 trillion yen, hitting a record high for the third straight year. Jiji Press