Japan's economic system shrinks in January-March quarter


The slight decline at the beginning of the year came as a blow to the economic policies of Prime Minister Shinzo Abe, who is already under pressure over a series of scandals.

Economists polled by Reuters last week had expected a contraction of 0.2%.

The poor first quarter snapped a string of eight straight quarters of expansion for the Japanese economy, which had marked the longest such streak in more than three years.

"There wasn't any particular driver for the weakness - private consumption and public demand were flat while investment spending and net exports fell slightly", Marcel Thieliant of Capital Economic said in a commentary.

But some economists believe the drop would be temporary.

"The economy is unlikely to continue to contract further".

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Private residential investment also plunged another 2.1 per cent after a 2.7 per cent fall in the previous quarter. "The global economy is performing well and a yen is trading beyond 110 yen against the dollar, so once exports start to grow again, the economy will return to a moderate growth path". The median estimate was for a 0.4 percent increase.

The economy contracted by 0.2 per cent quarter-on-quarter in the January-March period, compared with growth of 0.1 per cent at the end of 2017, the Cabinet Office said on Wednesday.

It was the first decline in nine quarters, snapping the longest stretch of continued expansion since the late 1980s.

Growth for the previous quarter was also revised downward according to data released Wednesday that reflected weaker spending by consumers, businesses and the government.

But consumer spending has remained stubbornly lacklustre, with companies staying stingy on wage hikes despite healthy profits.