Japan revised its earlier estimates to show that its economy contracted at a 2.9% annual pace in the first quarter of the year, as meanwhile a survey by the central bank released Monday showed conditions remain sluggish.
Analysts had expected the downward revision in the GDP data for January-March and said it was mainly based on a change in data on construction activity. The earlier estimate was of a 1.8% contraction in annual terms.
The quarterly survey by the Bank of Japan showed a modest improvement in business sentiment among large and medium-size manufacturers. But details of the survey showed weakness in demand both in Japan and overseas.
“Across all industries and firm sizes, business conditions held steady at 12, which is on past form consistent with (quarterly) GDP growth of around 0%,” Marcel Thieliant of Capital Economics said in assessing the tankan.
“A renewed slowdown in GDP growth this quarter would be consistent with the slump in industrial production firms were predicting for June,” he said.
A resumption of normal production among automakers after they had slowed factory lines due to shortages of computer chips last year was one factor behind the slight improvement in overall manufacturing sentiment, economists at ING Economics said.
The major highlight of the government's downward revision for growth early this year was that public investment contracted at a 1.9% rate. Earlier, it was estimated to have grown 3%. Private residential, or housing, fell 2.9% instead of the earlier estimate of a 2.5% contraction.
Japan's economy grew at a 0.1% annual pace in the last quarter of the year, just barely avoiding two consecutive quarters of contraction, or a technical recession. It expanded at a 1.8% annual rate in full-year 2023.
Weakness of the Japanese yen against the U.S. dollar has benefited exporters, who see their profits earned overseas inflated in yen terms when they are brought back home. But it also has sharply increased costs for the many commodities and products Japan imports, especially of oil and gas.
While the Federal Reserve in the U.S. has keep interest rates high to try to tame inflation that flared during the pandemic, Japan’s central bank has kept its benchmark rate near zero to keep credit cheap in hopes of spurring more spending and investment.
But price increases have have outstripped increases in Japanese workers' earning power, keeping demand relatively weak and sapping growth in an economy largely driven by consumer demand.
The latest data showed household spending falling in the first quarter of the year, in inflation-adjusted real terms.
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24 Comments
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obladi
Not enough earners in this shrinking, aging society.
dagon
What about all the virtuous cycles of wage growth and expansion supposedly coming from the LDP/BOJ policies of inflation, the tourist bonanza and the Osaka Expo?
The reality is this all window dressing and the only thing they care about is the tick up in asset prices and booming Nikkei. And their policies reflect that.
Let the people eat cup ramen?
proxy
But with a falling population the change in GDP/capita is more relevant.
nonu6976
163-165yen incoming.
WoodyLee
Boy Oh Boy, just imagine what will happen if the BOJ decides to raise interest rates!??
Butter run and hide.
WoodyLee
""163-165yen incoming.""
I can't remember where I read it, but experts believe that the yen will trade around 230 by the end of the century.
deanzaZZR
Stagflation, it's hard to do any worse.
/dev/random
How would they know where the yen will trade in 76 years?
Mad Magazine?
nonu6976
Same people downvoting the yen going to 163-165 are same that were downvoting when the yen was at 130, then 140, then 150...
Some folks never learn.
kurisupisu
I’m always thinking that I should change my foreign currency today but then I see the yen just losing value everyday and decide to wait for tomorrow…
Slayer
Bet on the dollar
Alan Bogglesworth
With this government in charge, get used to it.
Forst
End of the century? I'm wondering if a specialist can without laughing give such a prediction. Are your experts active in economics, at best futurology, or rather astrology?
ThonTaddeo
All the way at the bottom of the article we get the truth: inflation is destroying the economy. Or rather, it's destroying working people. Up at the top, the connected politicians and rentier class profit from it. And those people increasingly aren't even giving lip service to the needs of working folks. We saw this coming as soon as the LDP retook power and tried to bamboozle the public into thinking yen devaluation and inflation would somehow save them.
Alan Bogglesworth
Using technology and intelligence, this economy could be doing a lot better. This country seems to reward inefficiency and propping up big redundant corporations.
The aging population is an excuse. Japan still and will continue to have a massive population for a long time. Australia has a great economy right now, and has way less people. However it prides itself on innovation.
How much time is spent on trivial things in Japan like people having to tie up their cardboard waste before throwing it out, or writing their names on garbage bags, breaking up Styrofoam into small pieces for disposal in municipal waste bags? Even if it only takes 20 minutes to prepare your rubbish to throw away, that is 20 * 45 000 000 (not everyone does the rubbish) that's a huge number. Just fixing redundant systems like this would be a win and free people up to do more useful things.
I saw 6 road workers the other day measuring something, 6. How can 6 people be required to use a tape measure.
The waste station where I frequent has a women to greet you and ask you to tap a card, and then another man who takes your money, that's easily two people to do one job. Imagine being employed, sitting in an office all day, just to take someones change. Most places in the world would have contactless payments for this!!!! Cash only just to keep someone hired in a silly job.
I know these examples are trivial in some ways, but they are the problem.
Worker smarter, not harder really needs to be adopted here.
Let's stop the "aging population" excuse please.
SaikoPhysco
Japan's population is dropping to the tune of almost 1 million people a year. Last year the population fell by 900,000. By 2035 the population is forecast to drop to 110 million, with 54% of them being 50 or older. And it does not stop there, the population is forecast to continue to drop, possibly to 80 million. So GDP isn't going up anytime soon unless Japan can all of a sudden manufacture about 20 million android robots to sustain it. Yes, Japan needs people but the Govt. does not want to rock the boat because as you know, bringing in millions of immigrants will cause problems that they don't and never seem to want to deal with. If all of a sudden by some miracle I were made Prime Minister. I would have the Govt. advertise in foreign countries a 5 year Working Tourist Visa for those that can work remotely from any location. If, after those 5 years they want to stay, let them apply for a Permanent Visa. Many of these people might bring family and if they do not, they may marry here. Have the program include medical insurance and some sort of minimum tax to cover any cost of them being here. The have a program now but it is for too short of a time. Oh... and get someone to explain how to dispose of garbage...
Lionel Lyyn
People predicting the rise or fall of the yen like it is a guessing game. Yen is weak mainly because the main competitors of Japan (in exporting industries) has temporarily high interest rates. It depends more on FED and ECB than BOJ.
dan
The country is dying face it !!
Rakuraku
WoodyLeeToday 07:33 am JST
-11( +3 / -14 )
Talk to an expert (market economist) over a couple of beers, and he will confess that he really doesn’t have a clue where the USD/JPY exchange rate or any other economic data will go.
They make a comfortable living convincing others that they know, while in reality, they are just as clueless as you, me and anybody else on planet earth!
PTownsend
With a failed business person and his fellow oligarchs strong-arming the US economy for their own personal benefit, who knows how much time it will take for the US dollar to crash. Sorry for all the Americans here in Japan living off social security and military retirement benefits, losing them and their spending power could hurt the Japanese economy.
kurisupisu
Is this the 14th or15th month of lower growth-I lose count…
kurisupisu
Yeh, reality sucks…
tttccc111
Support the stock market by allow the international traders to short Yen relentlessly is equal to robbing the middle class to fund the businessmen