Con­trac­tion raises doubts about out­look

The Gulf Today - Business - - FRONT PAGE -

TOKYO: Ja­pan’s econ­omy con­tracted more than ex­pected at the start of this year, sug­gest­ing growth has peaked af­ter the best run of ex­pan­sion in decades, un­wel­come news for a government strug­gling to get trac­tion for its re­fla­tion­ary poli­cies.

Ja­pan’s econ­omy, the world’s third largest, shrank by 0.6 per cent on an an­nu­alised ba­sis, a much more se­vere con­trac­tion than the me­dian es­ti­mate for an an­nu­alised 0.2 per cent de­cline.

The con­trac­tion, which was driven by a de­cline in in­vest­ment and con­sump­tion and weaker ex­ports, comes as Ja­pan Inc wor­ries about the pos­si­ble ef­fect of US Pres­i­dent Don­ald Trump’s pro­tec­tion­ist poli­cies on global trade.

Econ­omy Min­is­ter Toshim­itsu Motegi said there was no change to the government’s view that the econ­omy was re­cov­er­ing mod­er­ately, pre­dict­ing a re­sump­tion in growth to be driven mainly by pri­vate con­sump­tion and cap­i­tal ex­pen­di­ture.

“But we need to be mind­ful of the im­pact of over­seas eco­nomic un­cer­tainty and mar­ket volatil­ity,” he said.

External de­mand - or ex­ports mi­nus im­ports - added 0.1 per­cent­age point to first-quar­ter GDP, as im­ports slowed more than ex­ports.

How­ever, a break­down of the data shows ex­port growth is los­ing mo­men­tum, ex­pand­ing just 0.6 per cent in the first quar­ter af­ter growth of 2.2 per cent in the fourth quar­ter.

“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.

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

“The econ­omy is not headed for a re­ces­sion,” said Hiroshi Miyazaki, se­nior econ­o­mist at Mit­subishi UFJ Mor­gan Stan­ley Se­cu­ri­ties.

“How­ever, it is clear that in the long term the pace of growth is slow­ing.”

Wed­nes­day’s data marked the end to eight straight quar­ters of eco­nomic ex­pan­sion, which was the long­est se­quence of growth since a 12-quar­ter run be­tween April-june 1986 and Jan­u­ary-march 1989 dur­ing the as­set-in­flated bub­ble econ­omy.

Fourth quar­ter growth was re­vised to an an­nu­alised 0.6 per cent, down from the 1.6 per cent es­ti­mated ear­lier.

Cap­i­tal ex­pen­di­ture fell 0.1 per cent, down for the first time in six quar­ters, sug­gest­ing cor­po­rate in­vest­ment is not as strong as many econ­o­mists had fore­cast. The me­dian es­ti­mate was for a 0.4 per cent in­crease.

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.


wa shop em­ployee holds a plac­ard to at­tract cus­tomers in Tokyo, Ja­pan.

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