Japan's economy shrinks for first time in two years

Marco Green
May 16, 2018

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.

"Globally, IT-related items have been in an adjustment phase, which weighed down Japan's exports and factory output", said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities. Moderate inflation is good for an economy as it encourages consumers to spend.

Policymakers worry that next year's planned sales tax hike could hurt fragile domestic demand as sluggish wages keep a lid on consumer spending, despite the record profits earned by Japanese corporations.

Japan's economy contracted at an annualized rate of 0.6%, marking the end of eight consecutive quarters of economic expansion.

Exports rose 0.6 percent.

Analysts said they expected to see a recovery in the current quarter of 2018 and that bad weather together with a global slowdown in demand for electronics had also led to the decline in the first quarter.

Capital expenditure fell 0.1 percent, down for the first time in six quarters, suggesting corporate investment is not as strong as many economists had forecast.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. This article is strictly for informational purposes only.

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