Ja­pan’s GDP Ends Best Growth Run in Decades


TOKYO (Dis­patches) - 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.

The world’s third largest econ­omy shrank by 0.6 per­cent on an an­nu­al­ized ba­sis, a much more se­vere con­trac­tion than the me­dian es­ti­mate for an an­nu­al­ized 0.2 per­cent de­cline.

The con­trac­tion, which was driven by de­clines in in­vest­ment and con­sump­tion and weaker ex­port growth, comes as Ja­pan Inc frets over the pos­si­ble ef­fects of U.S. Pres­i­dent Don­ald Trump’s pro­tec­tion­ist poli­cies on ex­ports. It also high­lights the cen­tral bank’s vul­ner­a­bil­ity to an eco­nomic or fi­nan­cial shock af­ter five years of heavy mon­e­tary stim­u­lus has left it with lit­tle am­mu­ni­tion to de­fend growth.

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 added. External de­mand - or ex­ports mi­nus im­ports - added just 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 per­cent in the first quar­ter af­ter growth of 2.2 per­cent Oc­to­berDe­cem­ber last year. Slower ex­port growth re­flected a de­cline in ship­ments of mo­bile phone parts and fac­tory equip­ment in the quar­ter, a government of­fi­cial said.

This is a con­cern for Ja­panese man­u­fac­tur­ers be­cause many of these ma­chines and elec­tronic com­po­nents are sent to China, where they are used to pro­duce goods for ex­port, but this trade is at risk if the Trump ad­min­is­tra­tion’s threat­ened tar­iffs on Chi­nese ex­ports go ahead.

“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 Ja­pan’s first-quar­ter con­trac­tion is tem­po­rary, but 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 stretch of growth since a 12-quar­ter run be­tween AprilJune 1986 and Jan­u­ary-March 1989.

Fourth quar­ter growth was re­vised to an an­nu­al­ized 0.6 per­cent, down from the 1.6 per­cent es­ti­mated ear­lier.

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 ex­pected. The me­dian es­ti­mate was for a 0.4 per­cent 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.

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