Thu, May 17, 2018 - Page 10 News List

Japan’s economy shrinks after two years of growth


Japan’s economy at the beginning of this year slid into reverse for the first time in two years, hit by sluggish consumption and a winter cold snap, but analysts predicted the world’s third-largest economy would quickly rebound.

The economy contracted 0.2 percent quarter-on-quarter in the January-to-March period, compared with growth of 0.1 percent at the end of last year, the Japanese Cabinet Office said yesterday.

This brought to an end a series of eight consecutive quarters of growth, but experts said that they expected a pause in the growth trend rather than a prolonged downswing.

“There were one-off special factors in the January-March period, ranging from stock market sell-offs to higher vegetable prices due to bad weather,” Norinchukin Research Institute chief economist Takeshi Minami said.

The yen also strengthened against other major currencies on safe-haven buying, clouding the prospects for Japanese exporters.

“There are worries about some emerging economy markets, but the global economy as a whole is likely to continue its recovery for some more time. [Japan’s] GDP will likely come back to positive growth in April-June,” Minami said.

The economy was stalled by stagnant private consumption, which was flat in the January-to-March period after an uptick of 0.2 percent in the final quarter of last year.

Private residential investment also plunged another 2.1 percent after a 2.7 percent fall in the previous quarter.

Exports of goods and services slowed in the period, rising 0.6 percent compared with an increase of 2.2 percent in the previous three months.

However, despite the broad-based slowdown, Minami said the economy would remain solid.

“If you look at the Bank of Japan’s Tankan survey released in April, business confidence was unshaken, with corporate investment plans remaining solid,” he said.

However, SMBC Nikko Securities Inc chief market economist Yoshimasa Maruyama warned that private consumption was weak, even when the special factors were taken into consideration.

Consumers will keep purse strings tight “unless the pace of wage increases shows a clear acceleration,” Maruyama said in a commentary published ahead of the data release, despite the yen’s drop against the US dollar, which often boosts the Japanese stock market, as a weak currency is positive for exporters.

Stock market traders appeared to be disappointed by the data.

The benchmark Nikkei 225 lost 0.44 percent, or 100.79 points, to close at 22,717.23, while the broader TOPIX ended down 0.27 percent, or 4.80 points, at 1,800.35.

The US dollar was changing hands at ¥110.26, marginally down from ¥110.33 in New York on Monday afternoon, but up from less than ¥110 earlier in Tokyo.

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