Japan’s economic growth unexpectedly accelerated in January- March, driven by net contributions from exports. The economy grew at an annualized 2.1% in the first quarter, gross domestic product (GDP) data showed on Monday, beating market expectations for a contraction. It followed a revised 1.6% expansion in October-December.
Private consumption and capital expenditure readings, which both fell in the first quarter, while exports suffered the biggest fall since 2015.
The surprise expansion was mostly caused by imports declining faster than exports, likely reflecting weak domestic demand, a point of concern for policymakers with a planned sales tax hike scheduled to take effect in October.
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The Japanese economy contracted the most in over four years in the third quarter as companies slashed spending to chill the investment outlook in 2019 as the nation grapples with slowing global growth and trade frictions.
Japan’s gross domestic product shrank at an annualized rate of 2.5% in the July-September quarter – the worst downturn since the second quarter of 2014 – from 2.8% growth in the second quarter, revised data from the Cabinet Office showed.
The slide, in part driven by a series of natural disasters that forced factories to cut production, was deeper than an initial estimate of a 1.2 percent contraction and against economists’ median forecast for a 1.9 percent decline.
The capital expenditure component of GDP fell a sharp 2.8% from the second quarter, worse than the expected 1.6% decline and the preliminary reading of a 0.2% drop. That was the biggest decrease since the third quarter of 2009, as wholesalers, retailers, and information and communications machinery cut spending, the Cabinet Office data showed.
Private consumption, which accounts for roughly 60% of GDP, fell 0.2% in July-September from the previous three months, versus 0.1% drop seen in the initial estimate. Domestic demand shaved 0.5 percentage points off the revised GDP figure, while net exports – or exports minus imports – contributed minus 0.1 percentage point.