Japan's economy shrinks for first time in two years

Koichi Kamoshida  Getty Images Koichi Kamoshida  Getty Images

Koichi Kamoshida Getty Images Koichi Kamoshida Getty Images

"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. However, there are concerns that trade friction with the USA could affect demand for exports.

Many economists expect the world's third largest economy will return to growth in the current quarter, while blaming temporary factors such as bad weather and a slowdown in global electronic products demand for the first-quarter slump.

Officials at the Cabinet Office attribute this to sluggish personal spending. The bank is widely expected to keep its benchmark lending rate unchanged at 1.50%.

Private consumption and capital expenditure slowed during the January to March quarter, which analysts said dragged down the economy.

The surprise quarterly decline saw the seasonally-adjusted annual rate decline to -0.6%, below the -0.2% level forecast by economists.

External demand - or exports minus imports - added 0.1 percentage point to first-quarter GDP, as imports slowed more than exports. Heavy snows in February also restricted household spending by keeping consumers inside and driving up vegetable prices.

Capital investment was down 0.1 percent. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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