Japan economy expected to shrink on weak consumption
Japan's economy likely contracted an annualised 1.5 per cent in the January-march quarter as all key drivers of growth slumped due to an uncertain outlook, a Reuters poll showed, which will probably set back Bank of Japan efforts to raise interest rates.
Cabinet Office data due out at 8:50 a.m. on May 16 (2350 GMT on May 15) is expected to show the economy's contraction would be equivalent to quarterly decline of 0.4 per cent, according to the poll of 17 economists.
The decline followed growth of 0.4 per cent annualised in the last three months of 2023, with the main pillars of GDP collapsing and leaving no growth engine for the January-march quarter.
"The trend of thrifty consumers remains strong due to rising living costs likely being exacerbated by the yen weakening," said Takeshi Minami, chief economist at Norinchukin Research Institute, who predicted the overall economy would contract at 1.2 per cent annualised in the January-march period.
Private consumption, which makes up more than 50 per cent of the economy, likely fell 0.2 per cent in the quarter as consumers tightened belts to guard against the rising costs living.
The earthquakes that struck the Noto peninsula at the start of this year also undermined output and consumption. As well, a scandal at Toyota's compact car unit Daihatsu led to the suspension of output and shipments.
Capital expenditures also fell 0.7 per cent quarter-on-quarter as companies remained slow to invest their hefty profits in plants and equipment, such as labour-saving technology to overcome labour shortages.
External demand, or net exports, which means shipments minus imports, likely shaved 0.3 percentage points off GDP growth. Domestic demand probably fell for a fourth straight quarter.
The corporate goods price index, a key gauge of prices corporations charge against each other, probably rose 0.8 per cent in April year-on-year, keeping the pace unchanged from March.
The CGPI data will be released at 8:50 a.m. on May 14 (2350 GMT on May 13).