Japan's GDP ends best growth run in decades as spending, trade fade


Tokyo stocks opened lower Wednesday following Wall Street's overnight decline and on reports just before the opening bell that Japan's economy shrunk at an annualized rate of 0.6 percent in the January-March quarter.

On a seasonally adjusted annualized basis, GDP was down 0.6% - again missing forecasts for a decline of 0.1% following the downwardly revised 0.6% gain in the previous three months. It ended the longest straight period of uninterrupted growth since the late 1980s.

Experts emphasized they viewed the first-quarter contraction as a pause rather than the beginning of a protracted downswing, with the global economy still picking up.

"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.

A sales tax hike to 5 percent from 3 percent in 2014 caused a large fall in consumer spending and tipped the economy into recession.

He forecasts that growth will slip to 1.2 percent this year from 1.7 percent in 2017. Heavy snows in February also restricted household spending by keeping consumers inside and driving up vegetable prices.

Japan's economy contracted more than expected at the start of this year, suggesting growth has peaked after the best run of expansion in decades, unwelcome news for a government struggling to get traction for its reflationary policies. The prime minister has held office for much longer than most of his predecessors.