Japan’s economy reduced in the first quarter

Japan’s economy likely declined in the first quarter as the hit to consumption from COVID-19 curbs offset the rise from robust global demand. Notably, it indicated the country’s slow recovery from a pandemic-induced fall.

According to analysts, an extension of state of emergency restrictions and slow vaccine rollouts are expected to keep growth weak in April-June. It is reinforcing views that Japan will lag other major economies in emerging from the recession.

The world’s third-largest economy is anticipated to have declined by an annualized 4.6% in January-March, following an 11.7% increase in the previous quarter.

On a quarter-on-quarter basis, real gross domestic product (GDP) likely dropped 1.2% in January-March.

Notably, the government will publish preliminary January-March GDP data at 8:50 a.m. on May 18.

Moreover, according to Reuters’ poll, private consumption likely dipped by 2.0% due mainly to curbs on economic activity put in place during the quarter to prevent the spread of the COVID-19 virus.

The poll also showed that capital expenditure is anticipated to have expanded 1.1% in the first quarter, slowing from a 4.3% increase in October-December.

A recovery in global growth helped economy expand for two straight quarters

Another essential thing to mention is that net external demand likely dipped 0.2% point off GDP, largely in reaction to a sharp rise in the last quarter.

According to analysts at Japan Research Institute, exports and capital expenditure continued to rebound thanks to solid external demand. Meanwhile, consumption likely declined sharply.

A recovery in global growth helped Japan’s economy expand for two straight quarters in October-December 2020. Japan was suffering its worst postwar decline in April-June last year due to the coronavirus pandemic.

Notably, after ending state of emergency curbs in March, the government re-imposed them in late April. It extended the measures through May to deal with a rise in new COVID virus strains, clouding the outlook for the fragile economic rebound.